Sector - Sustainability

Transport SMEs Hard Hit by COVID-19

While construction was hit hard, other sectors have been feeling the impact of coronavirus too. Of the 544,000 SMEs in distress, the analysis reveals the industrial transportation and logistics sector (covering transport of all goods across air, land and sea) saw the biggest increase in troubled companies with a 14% leap from 11,909 at the end of Q1 2020 to 13,528 at the end of Q3 2020. The food and drug sector was close behind with a 12% increase from 12,951 in Q1 2020 to 14,444 in Q3 2020.

However, when it comes to job protection these two sectors are not the most concerning. There are 344,000 jobs held by the 86,000 support services businesses in distress and 271,000 people employed by 32,000 troubled health and education businesses.

Shaun Barton, National Online Business Operations Director at , said:

“These latest results demonstrate that while some bigger companies are finding their feet in this recession it is the smaller companies that are suffering the biggest impact. With the pandemic having pushed more than 40,000 into financial distress, the backbone of the UK’s economy is suffering and we could soon have a dangerously top-heavy economy. To put that figure of 40,000 more distressed SMEs into context, there were just over 17,000 corporate insolvencies in 2019 as a whole.”

“The role of these smaller companies is key, not only as key suppliers with a vast array of important innovations, but as employers to millions of talented people that will be vital to funding the economic recovery after the world has either adjusted to, or found a solution to coronavirus.

“Both SME and start up construction firms have a vital role to play in rebuilding the economy. So many businesses rely on them both up and down the supply chain. There is a pressing need to keep building in order to make sure that the UK doesn’t fall behind in providing housing for people and better infrastructure for businesses and individuals. The UK construction industry is so often seen as a bellwether for the economy, if we can see it moving again, the rest of the UK may follow.

“To do this small businesses, which have little or no cash reserves, need to get ahead of the game by considering restructuring action now so that when the creditors come calling they are in a good space. We can offer help on or on the phone to talk through the options such as CVAs, administration, or Fast Track CVAs for companies that were in a good profitable position before the pandemic. Alternatively, there is a good market for investors and buyouts. The only thing that business owners have to be wary about is that these investors are looking for a good deal in a down market. It’s an option for an exit, and it could be a good one, but expectations will have to be lower than before the pandemic.”

Fledgling transport start-ups failing to fly

According to the insight, the number of fledgling businesses (born in 2017 or later) in significant distress in the industrial transport and logistics industry (transporting goods by land, air and sea) increased by 27% (Q2 2020 2,305 to Q3 2020 2,925) with a 22% increase for the construction sector (Q2 2020 10,302 to Q3 2020 12,617) and 21% for the telecommunications and IT sector (Q2 2020 4,519 to Q3 2020 5,454).

These increases are even more significant since the start of lockdown. There are now 53% more transport and logistics start-ups in distress than at the end of March, and 47% more construction start-ups in distress since the start of lockdown. Surprisingly, the number of start ups in the bar and restaurant sector in significant distress has only increased by 35% – this is thought to be due to financial aid from government.

These large increases are also seen in the regions with 25% more Northern Ireland start-ups falling into significant distress in the last quarter (Q2 2020 1,141 to Q3 2020 1,425). There was also a 19% increase for fledgling businesses in the north east (Q2 2020 1,902 to Q3 2020 2,257) and 19% for those in London (Q2 2020 24,003 to Q3 2020 28,567).

Shaun Barton continues: “Fledgling businesses are also at risk and are most likely to have not had the experience of which direction to turn when finances become difficult. We are advising these businesses daily and would recommend that they find out all their options before making rash decisions. The UK is filled with talented entrepreneurs; the challenge now is to help them take the next step. If there are financial issues, insolvency isn’t always the only option. Even the biggest businesses restructure; it’s just whether they do it correctly. The options are there; SMEs just have to take the leap.”

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