THE NUMBER of British businesses in immense financial distress and on the brink of collapse has soared by 25% to 650,000 during the past year, according to the insolvency specialists, Begbies Traynor.
The company is UK capitalism’s leading business rescue and recovery specialist. It insists that the issue is well beyond rescue and is whether British capitalism will survive!
It states that in spite of businesses having benefited from the removal of restrictions on 19th July, ‘constant changes’ to the government’s road map have made it hard for many firms to survive.
There has also been a dramatic increase in the number of ‘zombie’ businesses which have run up unsustainable debt through Covid loan schemes which they cannot settle, according to the Begbies Traynor new report.
Businesses that took out loans through the Bounce Back and CBILS schemes now need to make their first repayments, 12 months after taking on massive debt at the height of the coronavirus crisis.
The report points to evidence that shows that businesses protected from insolvency because of Covid-related emergency measures will soon be required to repay debts, and will be in the law courts explaining why they are unable to repay.
Official figures indicate there is increasing court activity as creditors, especially landlords, are becoming much more aggressive in chasing debts, according to Begbies. Companies received 14,460 county court judgments in April, May and June, equal to nearly double the number filed in the same period last year.
The government has, so far, not laid out how it will deal with the hundreds of billions of pounds of debt accumulated during the crisis, that analysts have said will stymie any attempt at economic recovery.
The UK’s economy may face a triple threat of ‘potentially catastrophic’ risks in the coming years, the country’s fiscal watchdog volunteers.
Julie Palmer, partner at Begbies Traynor, said many companies are ‘in a fragile state’, despite the ending of lockdown. ‘Although the reopening of the retail and hospitality sector has given the economy a boost in Q2 (second quarter), the number of zombie businesses remains considerable, with many in a fragile state,’ Palmer said.
‘Whilst ‘‘Freedom Day’’ on 19th July has given many businesses a sense of normality, history suggests that unmanageable levels of debts and subsequent overtrading will eventually take their toll on these businesses.’
Ric Traynor, executive chairman of Begbies Traynor, said businesses confronted living with sustained levels of debt for the following years.
He predicts: ‘Hidden risks abound for UK businesses and all represent a real threat to corporate survival in the short term.’ Among those is a shortage of supplies which has impacted carmakers, electronics firms and builders’ merchants, among others.
Staff absence because of self-isolation and the limited availability of foreign/migrant labour caused by Covid and Brexit is also having a serious effect, Traynor said.
These factors, he predicts, mean the number of businesses becoming insolvent is liable to rise in the latter months of this year and into 2022.
This means that directly ahead, as the bosses’ crisis intensifies, the class struggle will explode as workers are faced with fighting mass sackings, massive wage cuts and closures of hundreds of plants.
What will be required by the working class is a general strike to bring down the Tories and to bring in a workers’ government and a planned socialist economy. Capitalism needs to be buried in order for society to go forward to socialism.
The TUC is permanently on its knees in front of the bosses and their government and is incapable of leading this kind of struggle.
This means that a new revolutionary leadership must be built in the working class to resolve the crisis with a revolutionary general strike that will overthrow the ruling class and bring in a workers’ government.
Now is the time for workers and youth to join the WRP and its YS youth section, to build the revolutionary leadership capable of leading the struggle to bury out-of-date capitalism and go forward to socialism.