The real estate industry has suffered a greater rise in companies in financial distress than any other UK business sector during the past quarter.
The sector has seen a 6% increase in distressed businesses since the end of December, taking the total to 56,421, according to analysis from insolvency and advisory firm Begbies Traynor.
A surge of businesses in financial distress across all sectors is likely only to be “the tip of the iceberg” as the Covid-19 pandemic continues, warn analysts at the firm.
“The coronavirus pandemic is a true ‘black swan’ event that has decimated short-term business financial performance,” said Begbies Traynor partner Julie Palmer, adding that it is “still early days and with no end to the lockdown in sight things could get much worse”.
The firm’s latest Red Flag Alert report shows a record high of 509,000 UK firms in significant distress – defined as those with Country Court Judgements of less than £5,000 filed against them. The figure is 3% higher than at the end of 2019.
There was an even sharper rise of 10% in the number of firms in critical distress – those with CCJs filed against them of more than £5,000 – to 2,289.
The biggest rises in companies entering critical distress quarter-on-quarter were in the bars and restaurants sector (up 37% to 119), real estate (up 21% at 155) and construction (up 11% to 563).
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