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Waves of SME Insolvency Expected Within the Next Five Years

As many as 15% of the UK’s SMEs are categorised as ‘fragile’ or ‘at risk’ of insolvency within the next five years due to the withdrawal of the government support schemes, according to reports.

And, while last month we noted that the government was about to remove some of its insolvency protections, we failed to touch upon what that means for the UK’s SMEs.

So, here’s what this means in more detail, and how we at Cobra Financial Solutions provide a comprehensive insolvency service.

Fragile SMEs and Insolvency

In 2020, world-wide government support softened the blow of the Covid19 pandemic, reducing the number of fragile SMEs by more than 8,000 in Germany, France and the UK, according to Euler Hermes. Indeed, without state support, the number of SMEs at risk of insolvency would have stood at around 26%.

That said, recent forecasts show that, though government support did help some SMEs stay in business, a wave of insolvencies are expected within the next five years. Indeed, indicators suggest that a substantial number of SMEs are heading towards some sort of corporate distress or even insolvency a mere four years before bankruptcy.

Industries This is Set to Impact

Automotive manufacturers and suppliers rank among the most exposed to insolvency at the moment, with 36% of the sector set to be exposed. Furthermore, and as shown by the recent breakdown of multiple energy companies, a massive 25% of those in the energy sector are said to be at risk; whilst 1-in-5 of construction firms are presently vulnerable.

What’s more, here at Cobra, we have a wealth of experience of dealing with the automotive, energy and construction industries, whilst we have also worked with a number of other SMEs presently at risk.

Ana Borta, Head of Macroeconomic and Sector Research had this to say: “The story that emerges from our analysis is two-fold: While on the one hand government support has provided an incredibly effective safety net for swathes of the economy, the threat of insolvency remains all-too-real for many SMEs over the coming years.’

Moreover, Borta also touched upon the recent supply chain catastrophe now playing out in the UK: “For now, businesses will need to deal with the economic headwinds that threaten to slow the global recovery while at the same time planning effectively for long-term growth. Supply chain disruption leaves many open to supply shortages and inflation which will limit growth.”

How Can Cobra Help You as an SME?

If you’re feeling overwhelmed by the prospect of entering insolvency proceedings, know that you do not have to go it alone. We at Cobra are here to help and take the stress away from the whole proceedings for SMEs.

Cobra can take companies as far as liquidation, while we can also take individuals to bankruptcy. Costs vary depending on the work involved in each case as some are more complex than others.

Indeed, with over 75 years’ worth of combined experience, if you’re owed money and want to get it back quickly, take decisive action and instruct Cobra today on 0151 526 4222.

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