Home Business News Covid-19 holds 520,000 SMEs in distress endangering 1.7m jobs

Covid-19 holds 520,000 SMEs in distress endangering 1.7m jobs

by LLB Finance Reporter
27th Jul 20 7:59 am

The latest RealBusinessesRescue.co.uk Red Flag Alert data analysis for small and young businesses has revealed the number of SMEs in significant distress* now stands at 520,000, putting 1.7m jobs under threat.

The website RealBusinessRescue.co.uk, set up by Begbies Traynor to advise business leaders in financial distress, analysed data from Red Flag Alert discovering that coronavirus has plunged 16,000 more SMEs into distress in the last quarter alone – a 3% increase on the previous quarter.

In addition to this, RealBusinessRescue.co.uk discovered that the number of start-up businesses (born after 2017) in significant distress had also soared in the last quarter due to coronavirus. There are now 92,000 of these fledgling businesses in distress – an 18% (14,000) increase on the previous quarter when the total of businesses stood 78,000.

Food and Drug SMEs hard hit by coronavirus

Of all the 520,000 SMEs in distress, the RealBusinessRescue.co.uk analysis reveals the food and drug sector saw the biggest increase in troubled companies with a 6% leap from 12,951 in Q1 2020 to 13,741 in Q2 2020. Industrial transportation and logistics businesses were close behind with a 5% increase (Q1 2020 11,909 to Q2 2020 12,476).

However, when it comes to job protection these two sectors are not the most concerning. There are 324,000 jobs held by the 81,000 support services businesses in distress and 271,000 people employed by 30,000 troubled health and education businesses.

The research also found that rescuing SMEs in the hotel and accommodation sector could be the most beneficial for jobs. For every one business in distress saved in this sector, the UK could protect 10 jobs. For at-risk SMEs in health and education this equates to nine jobs, printing and packaging eight jobs and manufacturing six jobs.

Shaun Barton, National Online Business Operations Director at RealBusinessRescue.co.uk, said, “The hopes of a V-shaped recovery might be fading after the latest economic growth figures and the findings from our analysis demonstrate that SMEs have been hardest hit by the pandemic with 16,000 pushed into distress. Increasingly, SMEs across sectors are calling us up to ask for advice on which avenues they can take to save their businesses. We look at these figures and see that the government has good cause to save them.

“There are 1.7m jobs at stake within these troubled companies and the pay-off from saving businesses one at a time is huge. For the directors of these businesses, they know that it’s not just their company at risk. It is the livelihoods of their workers. Over the past few months many will have had sleepless nights worrying about their employees. It is at this point that they pick up the phone and talk to us, but they should feel free to talk before then and resolve issues before they grow.

“In these coming months, we expect that there will be more fallout, but we have to do all we can to help those businesses already in distress. CVAs, searching for investment or financial aid will become more normal as the months go on. Small businesses can get through this if they are presented with the correct avenues to take and we look forward to helping them through our specially set up helpline on RealBusinessRescue.co.uk.”

Fledgling telecommunications and tourism businesses failing to fly 

According to the insight, the number of fledgling businesses (born in 2017 or later) in significant distress in the travel and tourism industry increased by 21% (Q1 2020 372 to Q2 2020 578) with the same increase for the telecommunications and IT sector (Q1 2020 3,101 to Q2 2020 4,519) and industrial transport and logistics sector (Q1 2020 1,301 to Q2 2020 2,305).

These large increases are also seen in the regions with 20% more Welsh start-ups falling into significant distress in the last quarter (Q1 2020 1,633 to Q2 2020 2,805). There were similar 19% increases for fledgling businesses in the East of England (Q1 2020 3,586 to Q2 2020 6,289) and the Midlands (Q1 2020 6,359 to Q2 2020 11,341), although most concerning was the increase in economic powerhouse London (Q1 2020 14,020 to Q2 2020 24,003) which equates to 10,000 businesses.

Barton added, “Fledgling businesses are also at risk and are most likely to have not had the experience of which direction to turn when finances become difficult. We are advising these businesses daily and would recommend that they find out all their options before making rash decisions. The UK is filled with talented entrepreneurs, the challenge now is to help them take the next step. If there are financial issues insolvency isn’t always the only option. Even the biggest businesses restructure, it’s just whether they do it right. The options are there, SMEs just have to take the leap.”

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