More than half of UK listed companies most at risk of insolvency relying on government support

More than half of UK listed companies most at risk of insolvency relying on government support

Analysis by professional services network Ernst & Young LLP has found that more than half of the UK listed companies that are most at risk of insolvency made a claim for government support in December 2020.

Between March 2020 and March 2021, 63 UK listed companies issued at least their third profit warning within a 12-month period – almost double the 2019 total of 32. Statistically, up to one in five of these companies is likely to enter Administration within 12 months of the third warning.

More than half (35) of these companies claimed furlough support from the Government in December, and one third (21) are also claiming at least one other form of government support, including a CLBIL/CBIL, a CCFF, and/or the deferral of business rates and VAT.

In total, 174 UK listed companies issued at least their second profit warning within the 12-month March 2020-2021 period, with 42% (77) of them claiming furlough support in December 2020. The FTSE Travel and Leisure sector featured in this group more than any other sector (23), followed by FTSE Retailers (15) and FTSE Industrial Support Services (8).

Alan Hudson, EY-Parthenon UK&I Turnaround and Restructuring Strategy Leader, said: “The extent to which some of the UK’s largest firms have had to claim government support through the pandemic is evidence of the challenging environment in which many businesses have found themselves. Firms’ dedication to securing their future and continuing to provide for their customers, clients and employees is clear but, as government support comes to an end, many firms could be tested to their ultimate limit.

“Even stronger firms could face issues, and so supply chain resilience has never been more important. Disruption to even the smallest supplier could create significant challenges that ripple through the economy.

“The transition away from Government support measures won’t be straight forward, and could require a wholesale shake-up of firms’ strategies, recapitalisation models and operations if they are to avoid hitting a financial cliff edge.”