MORE than 2,600 businesses in the Southampton area are now in “significant” financial distress, research has suggested.

And there is a warning that the figure could have been much higher if the lockdown had not led to a drop in court activity.

The quarterly Red Flag Alert data from insolvency firm Begbies Traynor found there were 2,646 firms in serious distress between April and June.

The figure was up three per cent on the previous quarter and up eight per cent on the same period last year.

Across the UK, there were 527,000 companies in significant distress, an increase of 33,000 since the start of the year.

The number of bar and restaurant businesses in Southampton in significant distress rose by nine per cent since the previous quarter, while the number of retailers in that situation grew eight per cent. Some sectors showed signs of relative stability, including professional services and automotive.

Steve Powell, partner at Begbies Traynor in Southampton, said: “These are undoubtedly the toughest of times for all businesses. While the latest figures from our Red Flag Alert show that there has been a relatively small increase in the number of ailing companies here in Southampton over the past quarter, the true picture of financial distress may be concealed by inaction on insolvent and distressed businesses in the courts. This means we are more likely to see the real impact of the pandemic during the second half of 2020.

“There have been unprecedented company support measures from the Treasury during the pandemic, with both the furlough scheme and access to government backed funding schemes. But unfortunately, as the chancellor himself has admitted, not all businesses and jobs can be saved. While it is likely that this situation will get worse for many businesses before it gets better, those businesses that have the capital and the management ability will be better placed to adapt to the ‘new normal’.

“Even before the crisis hit, change had been coming, but the pandemic has increased the pace of this change. We have already seen some businesses make significant alterations to their structures and we’ll expect to see more in the coming months. But a crisis can be an opportunity – we’re in for hard times, but if this is a catalyst for change it could result in a better, more sustainable future.”


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