Virus Tipped 15,000 U.K. Firms Into Distress in First Quarter

(Bloomberg) -- More than 15,000 U.K. companies fell into “significant distress” in the first three months of 2020 as the virus shutdown took its toll on the economy, according to a quarterly survey published on Friday by insolvency specialist Begbies Traynor.

That’s the highest tally ever recorded by the survey and the largest quarterly increase since the end of 2017, bringing the total number of British companies falling behind on debts of up to 5,000 pounds ($6,220) to more than half a million.

Small and medium sized companies are the worst hit, with 99% of the struggling businesses captured by the survey employing less than 250 staff.

“Many businesses were being cut close to the root before this crisis started to affect the economy and may be left with little option but to cut their losses with the knowledge that they would never be able to pay back a loan, no matter what the terms,” said Julie Palmer, a partner at the firm.

Significant distress applies to firms with a court ruling against them on debts of as much as 5,000 pounds or if identified through a credit risk scoring system, according to Begbies Traynor. The number of companies in critical distress, defined as firms with court rulings against them on debts over 5,000 pounds, also increased by more than 250 to almost 2,300 in the three months to March, with bars and restaurants among the hardest hit sectors.

©2020 Bloomberg L.P.