Thousands of UK IT SMEs in financial trouble with 185,000 jobs at risk

Around 47,000 small tech companies in the UK are suffering significant financial stress after 18 months of Covid-19 disruption, putting 185,000 jobs at risk.

The figures, from business rescue and recovery firm Begbies Traynor, relate to the second quarter of this year and reveal a 41% increase in small and medium-sized IT enterprises (SMEs) in financial difficulty since the first lockdown.

According to data from the company’s Red Flag statistics arm, which monitors warning signs that companies could be in trouble, thousands of tech SMBs are now classified as being in serious distress.

Shaun Barton, national director of online business operations at Real Business Rescue, part of the Begbies Traynor Group, said the tech industry was “on top” before Covid-19 but disruption caused by the pandemic had slowed things. Over the past 18 months, Begbies Traynor has been involved in the liquidation of 109 UK tech SMEs.

“When you look at 2020, everything looked rosy,” Barton said. “Even at the start of the first lockdown, there were plenty of vacancies in UK tech and plenty of venture capital interest. This was probably the second lockdown when the number of distressed IT SMBs started to rise.

Small tech SMEs, including startups, have been hardest hit, he said. “They want to invest, but they just don’t have the money and getting funds is really difficult right now.”

Figures from Begbies Traynor show that the number of IT startups created after 2017 that are in serious financial difficulty has increased by 37% in the last quarter due to the pandemic. There are now 9,289 of these young companies in distress, compared to 6,779 at the end of 2020. At the start of the first confinement last year, there were 3,732 in distress.

Things are much worse now than when the first lockdown started due to the ripple effect of falling sales across the world and because big companies are preserving cash.

Small businesses are also struggling to get their messages across to potential customers, with the lack of face-to-face meetings and events hitting tech SMBs that depend on them to win business.

Barton said that by contrast, big tech companies have benefited from lockdowns because they’ve been able to transform. He said the rapid increase in adoption of the latest technologies such as remote working systems, as businesses tried to operate during the Covid-19 shutdowns, has also benefited large tech companies, mainly companies. global technologies based in the UK.

Looking beyond IT companies in the SME sector, figures from Begbies Traynor show that across the UK SME sector, 713,000 businesses are now in serious financial difficulty, a 15% increase on the end figure 2020.

Sarah J. Greer