Companies are set to write off £20m more in bad debt in 2020 than last year, with total business debt increasing by 1% as a result.

The government has rolled out a number of financial support measures to help companies stay afloat during the Covid-19 pandemic, but Red Flag Alert’s report shows the average debt per company going out of business has increased by 7%.

On average, insolvent businesses now leave behind £205,000 in unpaid invoices.

“Government Covid-19 support is shifting from grants and loans, and measures protecting businesses from insolvencies to rebuilding the economy,” Red Flag Alert’s managing director Mark Halstead says.

“At the same time, the completion of the Brexit transition draws increasingly closer, bringing new operational complexities and costs.

“Written off debt will grow significantly and repeatedly in the next six to 12 months. Companies need to ensure they are protecting themselves against an ever increasing risk of customers defaulting on outstanding payments.”

The retail sector has seen one of the largest rises in written off debt in 2020, with a rise 47.8% from £59.3m at the end of 2019 to £87.6m in mid-November.

Other noticeable rises include the construction sector, where write offs have risen by £31m to £283mi, while hotels have seen write-offs treble from £4.3m to £13.8m.

The travel and tourism sector has seen a similar change, with insolvent debt growing from £5.2m to £13.4m.

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