Two established Sheffield business recovery and insolvency firms have published contrasting statements on the outlook for the city’s businesses. Here unLTD's Chris Coates takes a look at the figures...
The number of financially struggling businesses in Sheffield and across the UK economy fell sharply in the third quarter of this year, according to the latest Red Flag Alert data published by business rescue and recovery specialist Begbies Traynor.
The figures for the three months to September 2021 showed a 12 per cent decline in the number of distressed businesses in Sheffield compared to the previous quarter, largely due to the relaxation of COVID regulations this summer. However, there had been a two per cent year-on-year rise in the number of distressed companies, compared with the third quarter of last year before the second national lockdown was imposed in November.
The new data reveals that a total of 4,100 Sheffield firms were displaying symptoms of early-stage or ‘significant’ financial distress in the three months to September, down from 4,700 businesses at the end of June this year. Significant distress refers to companies that have financial problems such as having minor county court judgements of less than £5,000 filed against them.
Kris Wigfield, managing partner at Begbies Traynor in Sheffield, said: “It’s encouraging to see levels of distress falling since the previous quarter, showing that many businesses in Sheffield and across the country are benefiting from the easing of COVID restrictions.
“While we all hope post-pandemic economic recovery is on the cards, the worry is that too many small businesses will go under before the Government addresses the serious logistical issues resulting from Brexit and COVID. As ever, small businesses that are struggling financially should seek professional help now before their situation becomes more serious.”
Despite these signs of recovery, many businesses are now operating on just a three-month reserve as the problems caused by the COVID-19 pandemic continue to impact the commercial world.
Latest figures from the Office of National Statistics show that 36 per cent of businesses who have not permanently stopped trading have cash reserves of three months or less available to continue trading.
“Businesses that have been hit particularly hard by the pandemic may well have dipped into their reserve funds in a bid to keep afloat,” said Ryan Holdsworth, of Sheffield business turnaround and insolvency practice Graywoods.
“Other businesses who may have taken advantage of Government support such as bounce back loans are seeing these must be repaid and this is another burden on their already delicate cash flow position.
“Just as important, there are signs of much more activity from HMRC, who may have taken a more lenient approach at the height of lockdown but are now looking to recover any taxes that are outstanding.
“And don’t forget that anybody who took advantage of one of the grants being offered during lockdown will also be having to pay tax on that sum, just one more burden that might not have seemed important at the time.”
