(Bloomberg) --
The number of U.K. businesses at risk of collapse has shot up this year, as the government's Covid-support programs are rolled back and firms face rising prices.
Nearly 1,900 U.K. companies were in critical financial distress at the end of March, a 19% increase compared to a year earlier, according to research by insolvency practitioners Begbies Traynor. The industry that saw the biggest rise was construction, up 51%, with bars and restaurants not far behind at 42%.
The number of County Court Judgements, legal orders requiring a party to pay a debt and often a leading indicator of future distress, hit the highest in five years last month, the data showed. There were 22,552 in the first quarter of this year, a 157% increase on a year earlier.
“The critical distress and CCJ data are likely predictors of a wave of insolvencies coming,” said Julie Palmer, a partner at Begbies Traynor. “It's just a case of when the dam holding it back finally bursts.”
Many U.K. businesses were badly hit by the coronavirus and the resultant lockdowns, with some having to cope with no revenue for months on end. Government loans and moratoriums have helped many firms cling on, but nearly all of those programs are coming to an end.
The withdrawal of support comes at a particularly difficult time as businesses grapple with spiraling prices. U.K. inflation surged to a 30 year-high of 7% last month, with prices up by 1.1% in March alone. The number of companies filing for some kind of insolvency proceeding in the U.K. rose to 2,114 in March, more than double a year earlier, according to data published by the Insolvency Service.
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“For the first time in more than a decade, inflation is the prime concern for businesses,” said Ric Traynor, executive chairman of Begbies Traynor. “This could mean that companies which have just been surviving, being kept alive only by government support, finally succumb to the inevitable.”
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