Some 562,550 UK businesses are in “significant financial distress”, according to the latest red flag research for Q3 2021 from Begbies Traynor.
Despite this number falling 14% since Q2 2021, with supply issues still on the rise, the report found that “considerable challenges” still lay ahead for UK businesses, including constrained raw material availability, rising inflation, labour availability, energy prices and rising Covid rates.
There has also been a 17% rise in “critically distressed” businesses in the past quarter, with 1,431 in Q2 2021 and 1,668 in Q3 2021.
Julie Palmer, partner at Begbies Traynor, said: “The UK economy – which remains one large recession short of its pre-Covid trajectory – is quickly recovering. However, it may prove to be transitory as rising CCJ figures are a cause for real concern.
“However, Inflation, energy costs and labour availability are risk factors for many of these businesses, particularly if they are unable to pass these costs on to their customers.”
Ric Traynor, executive chairman of Begbies Traynor, added: “The fall in significant financial distress is welcome news and provides some breathing space for hard hit businesses, however I remain concerned that trading conditions will deteriorate for many companies as supply chain issues affect output and input costs continue their upward trajectory.
“These risks combined with the withdrawal of government support measures and protection will undoubtedly see an acceleration in insolvency rates into 2022.”