Rise in firms at high risk of insolvency despite greater optimism, report says

UK firms are beginning to feel more optimistic about the outlook as coronavirus lockdown restrictions ease but increasing numbers of companies are at high risk of going bust in the fall-out from the crisis, according to a report.

The latest business distress tracker from Opinium and economics consultancy CEBR (the Centre for Economics and Business Research) found more businesses have a positive outlook for the next year than those with a negative view for the first time in a sign of hope for Britain’s battered economy.

Half of manufacturers and construction firms surveyed said they believe current trading conditions are good thanks to restrictions being lifted in those sectors first.

With lockdown still in place for many retailers and services firms, just 28% of those in that sector said trading conditions were good.

While there was an increase in the number of firms believing they are safe from insolvency – up from 58% to 63% – there was a worrying rise in companies that now believe there is a high risk of entering insolvency due to Covid-19 – at 544,000, up from 510,000 two weeks ago.

As hopes of a V-shaped recovery have long since faded, the study confirmed fears the economy will face a lengthy road to bounce back, with firms expecting it to take 31 weeks to get back to pre-crisis levels – up from 28 weeks previously.

James Endersby, chief executive at Opinium, said: “We are far from being out of the woods yet, but the direction of travel has injected greater positivity into the business community.

“The number of us going back to work is accelerating and many are seeing the prospects for their business improve.

“The challenge facing us is the disjointed return to normal – large numbers are facing disruption to demand from their customers and combined with issues further up the supply chain.

“Even once lockdown measures are removed business leaders still expect months of hard work until levels of production return to normal.”

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