The figures show that the numbers have fallen 14% since Q2 however, the numbers are still 15% higher than before the pandemic with Q3 2019 reporting the figure as 488,934.

There has also been a 17% rise in critically distressed businesses in the past quarter with 1,431 in Q2 and 1,668 in Q3.

The research by the business rescue and recovery specialist also shows that there has been a 139% increase in county court judgments (CCJs) in the last year.

The data classifies a business in significant financial distress as those with county court judgment orders of less than £5,000 and critical distress is classified as orders over £5,000.

There were 21,769 county court judgments lodged against businesses in Q3 2021 which is a significant rise from 9,101 reported in 2020. The data shows that there was also an increase of 51% between Q2 and Q3.

County court judgments (CCJs) are often the ‘bellwether’ for future insolvencies and the latest figures ‘paint a gloomy picture’ as the challenges ahead could erase the small steps businesses have managed to take since the worst of the pandemic.

Julie Palmer, partner, Begbies Traynor, said: ‘The UK economy, which remains one large recession short of its pre-Covid-19 trajectory, is quickly recovering. However, it may prove to be transitory as rising county court judgment figures are a cause for real concern.

‘Despite the summer economic boom, systematic problems remain, and some businesses are encountering difficulties in paying back government Covid-19 loans. However, inflation, energy costs, and labour availability are risk factors for many of these businesses, particularly if they are unable to pass these costs on to their customers.

‘Whilst many businesses have returned to a sense of normality, history suggests that high levels of debts and subsequent overtrading could eventually take their toll on these businesses.’

The research shows that the support services industry has reported 87,694 businesses facing significant financial distress with construction following with 72,465 and real estate and property with 70,552 businesses.

The figures also shows that the majority of businesses in significant financial distress are in London with 149,784 of the total figures based in the capital, the south east follows next reporting 101,690 businesses, but this number drops significantly with the Midlands reporting only 66,527.

Scotland, Wales and the north east are seeing a better picture with much lower rates of businesses reporting that they are in financial distress. In Scotland the data reports only 28,615 businesses, Wales only 16,769, and the north east only 10,974.

Ric Traynor, executive chairman, Begbies Traynor Group said: ‘I remain concerned that trading conditions will deteriorate for many companies as supply chain issues affect output and input costs continue their upward trajectory.

‘These challenges, combined with more aggressive creditor action, as evidenced by the rise in county court judgments, demonstrate that companies are taking a tougher line to recover debts, as evidenced by the recent rise in insolvency levels.’

Begbies Traynor states that along with their research and the 44% rise in small business defaults for loans to corporations that were published in the Bank of England’s most recent credit conditions survey, highlights three clear trends.

The firm states that there is ‘real concern’ among SME directors about their ability to pay back the government’s bounce back loans (BBLs) with many directors exploring short to medium-term insolvency options.

Secondly, Begbies Traynor states that many directors are saying that HMRC is taking an ‘increasingly aggressive line in chasing debts’ particularly to those who have defaulted on time to pay arrangements, with this causing many businesses to come under ‘considerable pressure’ from landlords chasing debts.

Traynor concluded: ‘These risks, combined with the withdrawal of government support measures and protection, will undoubtedly see an acceleration in insolvency rates into 2022.’