More than 3,000 Shropshire businesses in financial distress

The county saw a three per cent increase in the number of businesses struggling between the first and second quarters of the year to 3,071 – up six per cent on the same period in 2019.

The Red Flag Alert data for quarter two has come from independent insolvency firm Begbies Traynor and monitors the financial health of UK companies.

In Shropshire, businesses in some sectors faced greater financial difficulty than others, including real estate and property and bars and restaurants, with the number in distress both increasing seven per cent between quarter one and two.

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Even though some sectors showed some signs of relative stability – including food and drug retailers and telecommunications and IT – many businesses will be bracing themselves for further slowdown in quarter three.

Nationally, a record 527,000 businesses are in significant financial distress – the seventh consecutive quarterly increase, and a rise of 33,000 since the beginning of the year.

Begbies Traynor is also warning that the true number could have been much higher, was it not for reduced court activity due to the coronavirus pandemic, which has substantially reduced the number of CCJs (County Court Judgement) and other legal action being taken against indebted companies.

Mark Malone, partner at Begbies Traynor in the Midlands, said: “These are undoubtedly the toughest of times for all businesses. While the latest figures from our Red Flag Alert show that there has been a relatively small increase in the number of ailing companies here in Shropshire over the past quarter, the true picture of financial distress may be concealed by inaction on insolvent and distressed businesses in the courts.

"This means we are more likely to see the real impact of the pandemic during the second half of 2020.

“There have been unprecedented company support measures from the Treasury during the pandemic, with both the furlough scheme and access to government backed funding schemes. But unfortunately, as the Chancellor himself has admitted, not all businesses and jobs can be saved. While it is likely that this situation will get worse for many businesses before it gets better, those businesses that have the capital and the management ability will be better placed to adapt to the ‘new normal’.

“Even before the crisis hit, change had been coming, but the pandemic has increased the pace of this change. We have already seen some businesses make significant alterations to their structures and we’ll expect to see more in the coming months. But a crisis can be an opportunity – we’re in for hard times, but if this is a catalyst for change it could result in a better, more sustainable future.”