Dozens of business are at risk of collapse, as inflation spirals and Covid loan repayments are due, a report has warned.
Construction and hospitality are the sectors struggling most, according to insolvency firm Begbies Traynor, which is calling for the government’s repayments schedule to be extended.
In the first three months of this year there was a 19% rise in businesses in critical financial distress compared to the start of 2021, the report by Begbies Traynor said.
Julie Palmer, a partner at the insolvency and restructuring firm, said warned of a wave of business failures without emergency support.
"It's just a case of when the dam holding it back finally bursts," she said.
Begbies Traynor said 1,891 firms in a list of businesses that featured in its report now fall into the category of critical.
That’s in response to not just the pandemic, but last year’s lorry driver chaos, rising prices, supply chain disruptions and soaring energy costs.
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Meanwhile, firms are finding it hard to recruit staff in some sectors, and wage costs, including the minimum wage and National Insurance payments, have gone up.
"Inflation... gets referred to as the silent thief of the economy, I think it's actually becoming a bit of an armed robber, with real inflation probably running much higher than the [official figure] of 7%," Ms Palmer said.
There is also a "post-Brexit hangover" and these factors combined are "a perfect storm" of pressures on businesses, she said.
Begbies Traynor's research highlights a sharp rise in County Court Judgements (CCJs), an early sign of future insolvencies, because they show creditors are making legal claims.
CCJs were up 157% compared to a year ago, the report said.
From Saturday, landlords will also be able to start making legal claims against businesses.
"We think the landlords, who are a very impatient lobby, will swell those figures," she said.
Government insolvency figures for March also illustrate the trend towards more insolvencies.
They show voluntary liquidations had more than doubled compared to a year earlier as Covid support ended and rising wages and inflation took effect.
Ms Palmer said the government faced a choice: "Do they rush to recover funds handed out during the pandemic to ensure there was a functioning economy afterwards? Or [do they] look for ways to control the number of businesses that fail?
"Having put so much money into protecting businesses over the past two years, ministers won't want to see it wasted as companies collapse, unable to repay their debts," she said.
She said extending the repayments period of the Coronavirus Business Interruption Loan Scheme could offer a lifeline to businesses.
A government spokesperson said: "We have given businesses increased flexibility in repaying their Covid-19 loans, with borrowers under the Bounce Back Loan scheme able to extend their repayment term by ten years, as well as apply for repayment holidays," the spokesperson added.
