Cash Flow Shortages Pile Up for Britain’s Small Businesses
The number of the U.K.’s smaller businesses and startups facing serious cash flow problems surged last quarter, leaving companies that employ millions of people vulnerable as they emerge from lockdown.
More than 700,000 small- and medium-sized companies are now in significant financial distress, according to research by the advisory arm of intelligence provider Begbies Traynor published Thursday. That’s up 15% from the end of last year. The proportion of startups experiencing the most serious level of difficulty jumped 33%.
The figures indicate that 3.2 million jobs could be at risk unless those businesses are able to improve their financial situation. The pandemic has hit the U.K. hard, plunging it into the deepest recession in three centuries last year. Economists are becoming more upbeat about Britain’s recovery after survey data that shows consumer spending is bouncing back strongly.
The analysis suggests that the most recent lockdown along with Britain’s exit from the European Union have left the economy with serious scars. The number of transport and logistics companies in financial trouble climbed by almost a quarter in the three months to March.
The research defines significant distress as businesses with minor county court judgments filed against them or those identified by a sustained or marked deterioration in key financial ratios and indicators including those measuring working capital, contingent liabilities, retained profits and net worth.
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