Business

Hundreds of UK firms face collapse as Covid loan repayments materialise

The first three months of this year saw a 19% increase in companies in dire financial straits compared to the start of 2021, when a perfect storm of Social Security and energy hikes accompanied loan repayments

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A restructuring firm has warned that without more action to help struggling companies, there could be a wave of corporate failures

Dozens of businesses face collapse as spiraling inflation and Covid loan repayments fall due, a report warns.

Construction and hospitality are the sectors struggling the hardest, according to bankruptcy firm Begbies Traynor, which is calling for the government’s repayment plan to be extended.

In the first three months of this year there was a 19% increase in companies in critical financial difficulty compared to the start of 2021, according to the Begbies Traynor report.

Julie Palmer, a partner at the bankruptcy and restructuring firm, warned of a spate of business failures without emergency support.

“It’s just that the dam holding it back is finally breaking,” she said.

Begbies Traynor said 1,891 companies in a list of companies featured in his report now fall into the critical business category.

This is not only in response to the pandemic, but also to the chaos experienced by truck drivers over the last year, rising prices, supply chain disruptions and rising energy costs.

Is your business struggling to bounce back? Tell us your story: mirror.money.saving@mirror.co.uk







A restructuring firm has warned that without more action to help struggling companies, there could be a wave of corporate failures
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Picture:

Bloomberg via Getty Images)

Meanwhile, companies in some sectors are struggling to hire staff and wage costs, including the minimum wage and social security payments, have risen.

“Inflation… being called the silent thief of the economy, I think it’s actually becoming an armed robber, with real inflation probably much higher than that [official figure] of 7%,” said Ms. Palmer.

There is also a “post-Brexit hangover” and these factors together are “a perfect storm” of pressure on businesses, she said.

Begbies Traynor’s research shows a sharp rise in District Court Judgments (CCJs), an early sign of future bankruptcies as they show creditors are making legal claims.

CCJs are up 157% year-over-year, the report said.

From Saturday, landlords can also assert legal claims against companies.

“We think the landlords, who are a very impatient lobby, will swell those numbers,” she said.

The state insolvency figures for March also illustrate the trend towards more insolvencies.

They show that voluntary liquidations had more than doubled year-on-year as Covid support ended and rising wages and inflation took effect.

Ms Palmer said the government faces a choice: “Are they rushing to reclaim funds handed out during the pandemic to ensure there is a functioning economy afterwards? or [do they] looking for ways to control the number of failed businesses?

“Having poured so much money into protecting businesses over the past two years, ministers will not want it to go to waste when businesses collapse and cannot repay their debts,” she said.

She said an extension of the Coronavirus Business Interruption Loan Scheme repayment period could offer a lifeline to businesses.

A government spokesman said: “We have given companies more flexibility in repaying their Covid-19 loans, with borrowers being able to extend their repayment period by ten years and request repayment holidays under the bounce-back loan scheme,” the spokesman added.

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https://www.mirror.co.uk/money/hundreds-uk-firms-risk-collapse-26833324 Hundreds of UK firms face collapse as Covid loan repayments materialise

Fry Electronics Team

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