Coronavirus: More than 11,000 Midlands businesses in ‘significant’ financial distress
More than 11,000 businesses across the West Midlands, Shropshire and Staffordshire have been left in significant financial distress due to the coronavirus crisis and other factors,
Nationally in the first three months of this year it has topped half a million – the highest number ever measured by Red Flag Alert research for professional services consultancy Begbies Traynor.
The survey of the financial health of UK companies, reveals that 509,000 UK businesses are in significant financial distress with the bars and restaurants, real estate and property, construction and retail sectors particularly badly affected.
Small and medium-sized businesses have been hurt the worst with the total including 504,000 companies with under 250 employees.
In the West Midlands, there are more ailing firms in key towns and cities compared to the same period last year. Birmingham and Wolverhampton both saw significant year-on-year increases of eight per cent and 10 per cent respectively, with the number of ailing firms in Birmingham now standing at 7,651, and Wolverhampton, 1,407.
Walsall saw an increase of five per cent to 1,077, while the number of troubled businesses in Stafford and Dudley showed some stability, with Stafford holding steady at 651 and Dudley recording a decrease of three per cent at 494.
In Shropshire, Telford had a four per cent rise to 707 and Shrewsbury was up three per cent to 991.
More Covid-19 coverage:
Looking at the sector picture for the West Midlands, support services businesses are most affected, with 2,137 companies across the region in financial distress, which is up four per cent on the previous quarter. In addition, the real estate and property sector has been hit hard, experiencing significant year-on-year increase of 22 per cent compared to the same period in 2019.
Mark Malone, partner at Begbies Traynor in the West Midlands, said: “The coronavirus pandemic is a true ‘black swan’ event that has decimated short term business financial performance.
"Although it is still early days and with no end to the lockdown in sight things could get much worse, with the Red Flag research highlighting landmark levels of financial distress already. With many SMEs yet to access government funding, many will simply run out of cash, particularly with the April pay run approaching and payment for furloughed staff still outstanding.
“We hope that the concerted effort made by the Treasury to stand behind businesses through its package of measures proves to be successful so that the West Midlands business community and, ultimately the UK economy can withstand the huge pressures placed upon it during this time.
“Those businesses with strong balance sheets and access to funding will be able to reorganise their operations and survive the financial shock of this pandemic, while others will unfortunately not have the resources to carry them through this emergency.”
