The latest data from financial risk and business intelligence firm Red Flag Alert shows there are now 135,760 companies in London at serious risk of failure.
Analysis by the firm, which has been measuring corporate financial distress since 2004, shows there has been a 4% increase in the number of struggling companies in the capital since quarter one this year and a 10% rise compared to the second quarter of 2019.
London’s percentage increases are just above national figures of 3% for quarterly changes, and 9% for year-on-year changes, in the number of struggling businesses. The total number of UK companies in significant financial distress now stands at around 527,000 – an increase of 33,000 since the beginning of the year.
Red Flag Alert data shows that the food and drug retail (6%), logistics (5%), property and construction (4%), bars and restaurants (4%), food and beverage (4%) and professional services (4%) sectors have seen some of the highest percentage changes in distressed businesses since quarter one this year.
Partner at Red Flag Alert, Mark Halstead said, “The immediate assumption is that there’s a rising trend of struggling businesses because of the disruption caused by COVID-19. The reality is that it’s too soon for the actual impact of the pandemic to be seen in terms of corporate financial distress.
“Government support measures such as loans, grants, deferred taxes and furlough schemes will have prevented a high number of companies from collapse. It will become much more difficult for these businesses to survive when Government support comes to an end, which is when we’ll start to see the effects of the pandemic more accurately reflected in levels of insolvency.
“Levels of financial distress and insolvent debt are likely to spike later this year. Companies need to act now by recovering money they are owed and reducing the risks of dealing with customers and suppliers in poor financial health. This will help businesses to protect themselves and even create growth opportunities in a turbulent economy.”