Half a million UK businesses are ‘on the verge of collapse’ due to coronavirus crisis

MORE than half a million businesses are now close to going bust as a result of the coronavirus outbreak, an insolvency firm has claimed.

Problems accessing government loans have also hit businesses hard and it says the figures are just the "tip of the iceberg".

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In the first three months of the year, 509,000 businesses were described as being in significant distress because of factors including the pandemic, according to the data from the insolvency firm, Begbies Traynor Group.

It says if a company is in significant distress, it's just one step away from being in "critical distress" which happens just before a firm goes bust.

The majority of those affected are small businesses, with under 250 employees.

This comes as the government is criticised for not providing enough help for those affected.

The taxpayer-funded bank running the new business loan scheme has had 28,460 loan applications since lockdown began but just 6,016 have received money.

UK banks have also been ordered by the Bank of England to speed up the process of issuing loans to small businesses.

The firm says its results are just the “tip of the iceberg” as it won’t be until later in the year that the full impact to businesses from the pandemic is known.

It has a database of all UK businesses and it publishes a quarterly "Red Flag" report looking at their finances.

Julie Palmer, partner at Begbies Traynor, said: “The coronavirus pandemic is a true ‘black swan’ event that has decimated short term business financial performance. 

“Although it is still early days and with no end to the lockdown in sight things could get much worse, with the Red Flag research highlighting landmark levels of financial distress already.  

“While the loss of a business is devastating, UK business owners are talented entrepreneurs and after coronavirus will find opportunities. At this moment, we just have to anticipate what those opportunities are."      

At the start of April there were warnings that thousands of small businesses would go bust in three months because of problems accessing government loans. 

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