Half a million small businesses were in significant financial distress in the first of three months of the year, according to Begbies Traynor.

And this could only be “the tip of the iceberg” for the second quarter as the coronavirus lockdown comes into effect, cratering the UK economy and pushing small businesses into closing their doors.

One in four businesses in Britain has already been forced to close down temporarily because of the government’s coronavirus containment measures, according to the Office for National Statistics.

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In a survey of 5,316 businesses, the statistics agency found that 25 per cent had closed between March 23 and April 5.

Insolvency specialist Begbie Traynor’s latest quarterly Red Flag Alert survey found that small- and medium-sized businesses have been hit hardest, with 504,000 businesses saying they are in financial distress – just 5,000 short of the 509,000 total.

Almost 2,300 of these businesses were in “critical distress”, which is usually a precursor to insolvency, the firm said.

Ric Traynor, executive chairman of Begbies Traynor, said: “We expect these numbers to be the ‘tip of the iceberg’ and as the year progresses, we expect to see the number of organisations falling into significant and critical financial distress and ultimately insolvency to materially increase.

“We hope that the concerted effort made by the Treasury to stand behind UK businesses through its package of measures proves to be successful so that the business community and ultimately the UK economy can withstand the huge pressures placed upon it during this time.”

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Julie Palmer, partner at Begbies Traynor, added: “With many SMEs yet to access government funding such as Coronavirus Business Interruption Loan Scheme [CBILS], many will simply run out of cash, particularly with the April pay run approaching and payment for furloughed staff still outstanding.

“The Red Flag research demonstrates that many businesses were being cut close to the root before this crisis started to affect the economy and may be left with little option but to cut their losses with the knowledge that they would never be able to pay back a loan, no matter what the terms.”

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