The latest data from leading insolvency score analysts Red Flag Alert shows there are now 143,727 companies in London in significant financial distress.
The number of the capital’s struggling companies has risen by 6% in the last quarter, with almost 19,000 more businesses at serious risk of failure than this time last year. This represents a 15% rise on quarter three 2019, when 124,779 companies were showing consistent downward trends in financial performances and losses.
London’s percentage increases during the past two quarters mirror a national increase of 6%, which saw the total number of UK businesses in significant distress rise from 527,000 to 557,000.
Further analysis from Red Flag Alert, which has been collecting real-time data on the financial health of companies since 2004, shows that London’s logistics businesses have been amongst the hardest hit during the past quarter. There has been a 9% rise in the number of industrial transportation companies in significant financial distress, whilst the construction, retail and travel and tourism sectors have each seen a 7% increase since quarter two.
Managing Director of Red Flag Alert, Mark Halstead, comments: “We saw a 4% increase in the number of struggling London businesses from the first to second quarters this year. This has risen another two percentage points during the last quarter and, unfortunately, could get much worse as companies are hit by the disruption of another national lockdown.
“There’s also the uncertainty of the Brexit transition and what cross-border trading looks like after the end of January, which is why the logistics sector is seeing higher than average changes.
“The immediate concern is whether businesses in significant financial distress have the cashflow to not just survive another national lockdown, but to also weather a period of no or low sales during the pre-Christmas peak. Many companies, particularly throughout retail supply chains, will survive the rest of the year based on their Christmas revenue. Disruption over the coming weeks could cause a domino effect of business failures that we won’t really see for six to 12 months.”