More than 3,000 Shropshire businesses in financial distress

Shropshire saw a four per cent increase in the number of businesses struggling between quarters two and three in 2020 to 3,192 – up 10 per cent on the same period in 2019.

Nationally, the latest Red Flag Alert research for quarter three has recorded 557,000 businesses in significant distress after the largest quarterly leap in financially distressed companies since 2017. This six per cent increase comes despite a backlog of court action preventing many County Court Judgments (CCJs) and winding up petitions being issued.

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Official government data shows there were 26,244 CCJs lodged against companies during March, April and May in 2019, with only 10,045 lodged during the same period in 2020, a fall of 62 per cent. The situation is even more acute with regard to more serious winding up petitions. During March, April and May 2019, 1,019 were lodged compared to 101 during the same period in 2020, a fall of 90 per cent.

In Shropshire, businesses in some sectors faced greater financial difficulty than others, including industrial and real estate and property, increasing 14 per cent and nine per cent respectively between quarters two and three in 2020. And even though some sectors showed some signs of relative stability – including manufacturing and food and drug retailers – many businesses will be bracing themselves for what is to come over the next three to six months.

Mark Malone, partner at Begbies Traynor in Shropshire, said: “Shropshire businesses continue to face multiple challenges – from unpredictable consumer demand to restrictions on the way they offer their services, as well as managing the direct health impact of the pandemic on their workforce. This is undoubtedly taking its toll, as reflected in these regional figures.

“It is noteworthy that the number of businesses in significant distress has grown substantially in the last three months, even with court capacity significantly reduced due to the pandemic. As such, there could be a significant number of insolvencies when the courts do get back to anywhere near normal capacity and attempt to clear the backlog of pending cases. This, combined with the end of the furlough scheme and other government support measures, is likely to have a material impact on the business failure rate.

“Unfortunately, a combination of a grim economic data, and very poor trading conditions, particularly in the most vulnerable sectors such as hospitality will take its toll and this is expected to feed through to quarter one 2021 as restrictions continue.”