Tens of thousands of businesses in the South West were in “significant” financial difficulty in the last quarter of 2021, new data reveals.
Some 41,372 businesses in the region were in trouble – up 4% from the previous quarter of the year – according to a study by business recovery firm Begbies Traynor.
The Red Flag Alert report, which monitors the financial health of UK businesses, found the worst-hit sectors were hotels and accommodation (up 8%) and travel and tourism (up 9% ).
The data covered Avon’s businesses; Bristol; Cornwall; Devon; Dorset; Gloucestershire; Somerset; Wiltshire; and the Isles of Scilly.
In Bristol alone, some 7,000 businesses are in financial difficulty, according to the research.
This indicates that the debt storm that has been brewing for years – and temporarily halted by measures to support businesses during the pandemic – could now be about to hit, sending shockwaves through many sectors.
Nationally, more than half a million businesses struggled during the period – a 5% increase since the third quarter of 2021. There are also concerns about a sharp rise in judgments County Courts (CCJ), which are often an early sign of future insolvency, as official data showed a 106% increase.
Paul Wood, partner at Begbies Traynor in Bristol, said: “Businesses in Bristol [and the South West] who bravely fought the pandemic may finally begin to fail as the pressures they face grow too great.
“Government support, such as furlough payments, tax breaks and a moratorium on landlords being able to evict businesses over rent arrears, cannot last forever.
“Without those in place to protect them, a growing number of businesses in the region will have no choice but to throw in the towel after two years of struggling amid economic uncertainty caused by measures to combat the coronavirus. .”
Mr Wood said the ‘lag effect’ of the economic fallout from Covid, along with spiraling inflation, had created a ‘perfect economic storm’ for many businesses, particularly the region’s SME sector .
Begbies Traynor says inflation is now the ‘silent thief’ of the economy, with the real rate likely to go well beyond the official estimate of 5.4% – and possibly more than seven times the target 2% from the Bank of England.
“Rising wage, energy and material costs mean the CPI numbers only tell part of the story and the subsequent impact on the public’s disposable income is expected to be far greater. “Begbies Traynor said in a statement.
However, although the official government support measures are dissipating, there are signs that the authorities are willing to help companies trying to struggle.
Mr Wood added: “Anecdotally, we hear stories about HMRC giving companies two or even three years to pay their tax bills.
“Additional leniency may not be official policy, but it sends a signal that officials are trying to help companies survive – even if it only delays the inevitable.”