Image source, Getty ImagesA growing number of UK businesses are at risk of going under, as costs spiral and Covid loan repayments come due, according to a report.
The sectors that are struggling the most are construction and hospitality.
Extending the loan repayment schedules would ease the pressure.
The government said it had given businesses an unprecedented package of support.
In the first three months of this year, there was a 19% rise in businesses in critical financial distress compared to the start of the year.
There would be a wave of business failures if there wasn't more help for struggling businesses, said Julie Palmer, a partner at the insolvency and restructuring specialist firm.
She said it was a case of when the dam holding it back finally burst.
The strain two years of extraordinary financial pressures have had on thousands of companies was reflected in the research by the company. It said 1,891 firms are now considered critical, suggesting their outlook is not good.
Although Covid restrictions have been lifted, some firms are still feeling the impact of disruptions to supply chains and the price of energy and other inputs have risen sharply.
Wage costs, including the minimum wage and National Insurance payments have gone up, as firms are finding it hard to recruit staff in some sectors.
With the cost of living rising, many UK households are looking for ways to save money, putting more pressure on businesses that rely on discretionary spending.
The rise in County Court Judgements is an early sign of future insolvencies, because they show the debts are being paid off.
The report said that CCJs were up 151%. Ms Palmer said that the current level of CCJs was likely to be the tip of the iceberg due to a logjam of court cases.
Government insolvency figures for March show a trend towards more insolvencies. The most common way for firms to be wound up had doubled compared to a year earlier.
Firms relied on state support during the Pandemic. Firms are now facing a perfect storm of rising wage, energy and borrowing costs, and that support is gone.
Do the government rush to recover funds given to them during the Pandemic to make sure there is a functioning economy afterwards? 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, she said.
She said that taking a longer-term view of repayments of the business insolvency loan scheme would help struggling businesses.
VAT cuts, business rates holidays, and government-backed loans were some of the support offered to businesses.
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.
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