More than 132,000 marketing and media jobs are at risk from the effects of Covid-19 on the industry, with a total of 22,898 businesses in the sector in “significant financial distress”, up 6% since Q1.
So says a damning analysis, carried out by RealBusinessRescue.co.uk, a site set up by Begbies Traynor to advise business leaders in financial distress. Analysing data from Red Flag Alert, it discovered that there are 544,000 SMEs in distress across all UK sectors, with a total of 1.8 million jobs under threat.
Research by the Chartered Institute of Marketing estimates that almost 40,000 people – one in ten of the sector’s workforce – have already lost their jobs during the pandemic, with many more to come as the UK heads into lockdown 2.0.
According to RealBusinessRescue, the number of tech start-ups (set up after 2017) in significant distress has soared by 21% in the last quarter due to the pandemic. There are now 5,454 of these fledgling businesses in distress – a 46% increase since the start of lockdown when there were 3,732 in distress.
These rapid increases in distress for such small and young companies is worrying when considering that the number of insolvencies in 2019 was just 17,196, the company claims.
Of the 544,000 SMEs in distress, the analysis reveals the industrial transportation and logistics sector (covering transport of all goods across air, land and sea) saw the biggest increase in troubled companies, with a 14% leap from 11,909 at the end of Q1 2020 to 13,528 at the end of Q3 2020. The food sector was close behind with a 12% increase from 12,951 in Q1 2020 to 14,444 in Q3 2020.
However, when it comes to job protection these sectors are not the most concerning. There are 344,000 jobs held by the 86,000 support services businesses in distress and 271,000 people employed by 32,000 troubled health and education businesses.
RealBusinessRescue national online business operations director Shaun Barton said: “These latest results demonstrate that while some bigger companies are finding their feet in this recession it is the smaller companies that are suffering the biggest impact. With the pandemic having pushed more than 40,000 into financial distress, the backbone of the UK’s economy is suffering and we could soon have a dangerously top-heavy economy.”
“The role of these smaller companies is key, not only as key suppliers with a vast array of important innovations, but as employers to millions of people that will be vital to funding the economic recovery after the world has either adjusted to, or found a solution to coronavirus.
“SME and start-ups businesses are integral to the future of the UK. They are an enabler for our move into the future, and these smaller businesses are vital for driving new innovation, with many seeing rapid growth after having an idea and developing it. This doesn’t just mean these businesses can be catalysts for business growth, but job creation too.”
These large increases are also seen in the regions, with 25% more Northern Ireland start-ups falling into significant distress in the last quarter (Q2 2020 1,141 to Q3 2020 1,425). There was also a 19% increase for fledgling businesses in the North-East (Q2 2020 1,902 to Q3 2020 2,257) and 19% for those in London (Q2 2020 24,003 to Q3 2020 28,567).
Barton continued: “Fledgling businesses are also at risk and are most likely to have not had the experience of which direction to turn when finances become difficult. We 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 isn’t always the only option. Even the biggest businesses restructure; it’s just whether they do it correctly. The options are there; SMEs just have to take the leap.”
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