HUNDREDS of companies in Milton Keynes are now classed as in “significant” economic distress, according to the latest figures from a leading corporate recovery company.
The quarterly Red Flag Alert research carried out by Begbies Traynor shows that companies based in the city are facing increasing financial pressure due to interest rates, debt, subdued consumer confidence, high energy costs and wider economic uncertainty.
The findings show 358 are at risk of failure, a rise in Q3 of 19%.
Julie Palmer pictured right, partner at Begbies Traynor in Milton Keynes, said: “This latest data highlights how the debt storm, which has been brewing for years, but had been held off by several measures to provide breathing space for companies, is likely to break. Businesses that had loaded up on debt at rock-bottom rates and were only able to cling on during the pandemic thanks to government support must now deal with a financial reality check as higher interest rates hit working capital for the foreseeable future.”
Begbies Traynor’s findings highlight trouble particularly in the telecommunications and IT and professional services sectors, which have seen rises of businesses in distress of 29.4% and 22.9% respectively.
Nationally, the latest Red Flag Alert research for Q3 2023 recorded 478,176 businesses in significant distress, up by 8.7% on the previous quarter. Almost 40,000 are classed as being in “critical financial distress”, led by companies in construction, real estate and property which saw rises of 46%, 38% and 28% respectively.
“Taken together with stubbornly high inflation and weak consumer confidence, many of these businesses will inevitably head towards failure,” said Ms Palmer. “While stabilising inflation and interest rates could start to slow the rising levels of distress in the economy, history dictates that this will take some time and insolvencies often peak long after a recovery has started. Unfortunately for many businesses, time is not on their side.”