This figure represents a a 15% increase in the last quarter of 2020 alone in the number of SME manufacturers that are struggling with the financial conditions caused by the pandemic.
The website RealBusinessRescue.co.uk, set up by Begbies Traynor to advise business leaders in financial distress, analysed data from Red Flag Alert and discovered that these manufacturing firms in significant distress are part of 620,000 SMEs in distress across all sectors, with a total of 2.8 million jobs under threat.
"These latest results demonstrate that for many SME and start-up businesses the financial challenge of the pandemic remains in place," said Shaun Barton, National Online Business Operations Director at Real Business Rescue (pictured). "With a 14% increase in the number of smaller sized companies reported to be in significant financial distress during Q4 of 2020, this continues the trend we have seen since the health crisis first struck back in March.
“The manufacturing sector has been affected by outside influences and demand slowdown caused by the unprecedented circumstances brought about by the health crisis, as well as pressures to operate safely. We have seen a 22% increase since March 2020 and another significant leap in the last quarter of 2020. The sector needs to stand firm in the hope that an upturn in economic activity and a return to more normalised commercial conditions to help its recovery. With restrictions currently in place, it may well be later into 2021 that we see this materialise."
In addition to this, the figures show that the number of start-up manufacturing firms (those born after 2017) in significant distress had increased by 18% in the last quarter due to the pandemic. There are now 3,333 of these fledgling businesses – a increase of over 1,200 since the start of lockdown, when there were 2,043 in distress.
"Start-up businesses are also at risk and are most likely to have not had the experience of which direction to turn when finances become difficult," added Barton. "We are advising these businesses daily and would recommend that they find out all their options before making rash decisions. The UK is filled with talented entrepreneurs; the challenge now is to help them take the next step. If there are financial issues, insolvency is not always the only option. Even the biggest businesses restructure; it is just whether they do it correctly. The options are there; SMEs just have to take the leap."
