Business recovery firm Begbies Traynor has released its "Red Flag Alert" report for Q3 2021. The report identifies a sharp increase in the number of county court judgments lodged against companies in the third quarter. In total 21,769 companies faced judgments in the three months to end September, compared to 14,460 in the previous three month period (and only 9,101 over the same period in 2020). With creditors increasingly turning to the courts to enforce unpaid debts, it is likely only a matter of time before corporate insolvencies begin to follow the same trajectory.

Begbies Traynor also reports that 562,550 businesses are now in "significant financial distress" (classed as businesses which face a county court judgment of less than £5,000, or have otherwise been identified by the firm's credit risk scoring system). This represents a fall of 14% since Q2 2021 - potentially due to an element of recovery in some sectors owing to a release of pent-up consumer demand. However, of more concern is the 17% increase in businesses which are classed as "critically distressed" - with 1,668 facing judgments of over £5,000 in the third quarter. 

Companies face intense pressures over the next few months.  For directors of SMEs, many of which have accumulated large amounts of debt during the pandemic, concern over repayment of bounce-back loans and HMRC debts looms large. With rising inflation, energy costs, labour shortages and global supply chain issues acting as a curb on trading recovery, many businesses may well be facing a very bleak midwinter indeed.