There are now 557,000 businesses in 'significant distress' after a big leap in financially troubled firms.
That's according to research from business recovery specialist Begbies Traynor, which found the biggest increases in struggling companies came in the food and drug retailers, construction and real estate and property sectors.
Worse, the rise could have been far higher if courts were operating normally - with the number of county court judgements and winding up petitions lower thanks to coronavirus restrictions on courts and winding up petitions for Covid-19 related debts banned.
That's led to concerns that, once these restrictions are lifted and Government support removed, the number of firms going bust could surge as a "brutal reality check" hits the UK economy.
Begbies Traynor partner Julie Palmer said: "With so many businesses limping along there could be a flood of insolvencies when the courts do get back to anywhere near normal capacity and attempt to clear the backlog of pending cases.
"This in itself, combined with the end of the furlough scheme and other Government support measures, is likely to have a material impact on the UK business failure rate."
She added: "Unfortunately for the many zombie companies in existence across the UK, a perfect storm is on the horizon.
"A combination of a grim economic backdrop and very poor trading conditions, particularly in the most vulnerable sectors, such as hospitality will take its toll . . . particularly when the Government ends its high profile corporate life support measures."
All 22 sectors measured showed an increase in significant distress since the start of the year, but some fared worse than others.
In the last three months alone almost 4,500 construction businesses have fallen into significant distress after the industry failed to fully recover from lockdown.
The hospitality sector was also hit hard, with a 10% increase in distressed bars and restaurants since the start of lockdown and a 5% increase in the last quarter alone - despite being allowed to reopen.
Retail is also in trouble, with a 9% increase in distressed companies lockdown.
Some 17,000 automotive businesses are also in distress, many of them within the automotive supply chain as big carmakers scale back.
Begbies Traynor chief executive Ric Traynor said: "The Government's well publicised support measures have saved thousands of businesses from certain insolvency in the short term, but the recently launched reduced version of the furlough scheme and the end to Government guaranteed loans will serve to give many businesses a brutal reality check.
"In fact, many of these businesses were debt laden before the pandemic struck and had little prospect of a viable turnaround.
"They have seen their life prolonged by the availability of Government loans and employee cost subsidies, as evidenced by the 30% + fall in insolvencies over the last six months.
"Inevitably their underlying lack of profitability and accumulated debt will catch up with them once the subsidies end and they face the harsh realities of the challenging economic environment."