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The number of firms going bust tumbles as government measures kick in

8 May 2020

KPMG studied notices in The Gazette which showed 61 companies fell into administration during April, less than the 91 in April 2019.

It also marks a 55 per cent tumble on the month before, with 135 firms going into administration.

The number of firms going bust had tumbled by a third last month due to the Governments support measures rolled out. This includes the job retention scheme which has seen many people furloughed on 80 per cent and the Coronavirus business interruption loan scheme among others. According to KPMG, the action the Government has taken has given firms the headroom needed to survive the initial hit of the Covid-19 pandemic and lockdown.

But the report shows companies are facing greater risks as the economy tries to recover. This was especially resonated when the Bank of England warned the UK economy was set to plummet to 14 per cent this year, being the biggest annual fall on record. The recovery is expected to take longer than a year once lockdown begins to lift.

Firms shall be advised not to scale back up too much or too soon with uncertainties over consumer confidence and the costs of implementing social distancing being prevalent.  Cost-saving gains across day-to-day operations should be used to boost financial strength, with possible asset sales considered.

Telecommunications, pharmaceuticals and food and drink sectors are thought to be the best positioned to withstand the downturn. Companies in the non-retail, casual dining, real estate and travel and tourism are thought the most vulnerable.

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