More than 16,800 Welsh businesses are in significant financial distress, according to new figures.
Financial advisory Begbies Traynor’s Red Flag Alert report, which monitors the financial health of British companies, found that 16,896 businesses in Wales were in significant distress in Q1 2022 - with a third of these businesses (4,941) in Cardiff and Swansea.
The figures represent a 2% decrease in the number of businesses struggling between Q4 2021 and Q1 2022, which was also a 24% year-on-year fall in the same period in 2021.
While Cardiff saw a 3% quarterly rise, with retail particularly affected, registering a 13% increase in struggling businesses between Q4 2021 and Q2 2022.
Food & drink and professional services sectors saw the biggest quarterly increases, with one and two percent rises respectively between Q4 2021 and Q1 2022.
Huw Powell, managing partner at Begbies Traynor across south Wales, said: “While the year-on-year data of companies in Wales in significant distress may be encouraging, the critical distress and CCJ (county court judgments) numbers highlight troubles building up in the system. For the first time in more than decade, inflation is the prime concern for businesses as companies struggle under rising costs.
“However, having ploughed so much money into protecting businesses over the past two years, the Government won’t want to see it wasted as companies collapse, unable to repay their debts. Taking a hard line on repaying pandemic funding and other loans would likely drive many businesses over the edge, which no-one wants to see as the economy struggles to recover.”
He added: “As such, there needs to be a long-term view. For example, we could see support for businesses through leniency in repaying pandemic funding, or an approach like war bonds, with terms being extended as ministers follow the adage that a rolling loan gathers no loss.
“However, any businesses facing financial difficulties, for whatever reason, should seek professional advice in order to fully understand the options available.”
Nationwide, the latest Red Flag Alert research for Q1 2022 recorded 581,596 businesses in significant distress, which it said was flat on the previous quarter.
However, the figures also showed a marked increase in the number of UK firms classed as in “critical financial stress” — businesses with CCJs of more than £5,000 filed against them.
The research showed a 19% year-on-year increase driven by a 51% jump in the construction sector and a 42% rise among bars and restaurants.
There are also concerns about a steep increase in CCJs as data revealed there were 11,673 rulings in March – up 179% on the monthly average for the previous two years – and the highest level in a single month in five years.
