More than 3,000 Shropshire businesses in significant distress, while pressures pile up on the horizon

However, the trend of quarterly decreases continues from quarter two, with Shropshire seeing a 15 per cent fall in the number of struggling businesses between quarter two and three to 3,148, which was also a one per cent drop on the same period in 2020, as the majority of Covid restrictions were removed and the economy reopened.

Similarly, while professional services and real estate & property businesses in the region saw seven and five per cent annual increases respectively, it represented a 13 and 12 per cent decrease between quarters two and three.

That said, Begbies Traynor is warning that there are considerable challenges ahead for businesses, including constrained raw material availability, rising inflation, labour shortages, spiralling energy prices and the winding back of government Covid support measures, that could yet impact failure rates during the rest of 2021 and beyond.

Nationally, the latest Red Flag Alert research for quarter three 2021 (July-September) has recorded 562,550 businesses in ‘significant distress’, a 14 per cent fall since quarter two. However, the figures showed that, despite the quarter three improvement in the financial performance of businesses, the number of significantly distressed companies is still 15 per cent higher than pre-pandemic.

There are also concerns in a steep rise in CCJs, which are often a bellwether for future insolvency, as official data shows there were 9,101 CCJs lodged against companies during quarter three 2020, rising to 21,769 during quarter three 2021, a 139 per cent uplift.

Mark Malone, partner at Begbies Traynor in Shropshire, said: “The quarterly fall in significant financial distress is welcome news and provides some breathing space for hard hit Shropshire businesses. However, concerns remain that trading conditions will deteriorate for many companies, with rising CCJ figures an early indicator that some suppliers are running out of patience with customers stretching payment terms.

“Despite the summer economic boom, systematic problems remain, and many businesses face a long-term struggle with repaying government-backed Covid loans. However, the combination of inflation, energy costs and labour availability may prove to be the tipping point for some businesses, particularly if they are unable to pass these costs on to their customers. These risks, combined with the withdrawal of government support measures and protection, could make for a challenging end to 2021 which could continue into 2022.”