Experts predict that the brunt of the pain will be felt in the retail, hospitality and construction sectors.
Glen Flannery, Restructuring and Insolvency Partner at law firm City CMS, said: “We have already seen an increase in insolvencies in more vulnerable sectors such as construction and energy retail.
“The impact in other sectors has been less pronounced, but the number of business bankruptcies is trending up across the board as pandemic-related government support has been withdrawn.”
FRP’s Rowley thinks the crisis in retail and hospitality could be particularly acute. He says, “Hospitality has rebounded from the pandemic, but consumers will be looking to tighten their belts in the fall, especially when energy bills rise again in October.”
CMS’s Flannery agrees. “Many consumer-oriented businesses, such as hospitality and leisure, have seen a resurgence in pent-up demand following the lifting of Covid restrictions.
“However, this should ease as the severe pressure on household disposable income takes hold.”
Still, Quantuma’s Bonney thinks the economic difficulties could be so widespread that the impending storm could be “apart from the sector”.
“There is a lot of vulnerability in the SME [small and medium-sized enterprises] end of the market. Any company that is heavily dependent on energy is also particularly exposed to risks.
UK small businesses have also become addicted to cheap debt during the pandemic. At the end of last year, the Bank said a third of UK small businesses were classified as highly indebted, more than double the amount before the pandemic.
SMEs, many of whom would not have met loan requirements before the pandemic and would never have borrowed before, accounted for around two-thirds of the £79bn rise in UK corporate debt between the end of 2019 and the first quarter of 2021, the Bank warned.
So how much worse could things get – or rather, how much better could they get for insolvency and restructuring practitioners? Bonney is candid: “There’s a storm coming.”