MORE than 2,700 Milton Keynes ended the third quarter of the year in “significant” financial distress, according to new figures from an insolvency specialist.
However, the trend of quarterly decreases continues from quarter two, with Milton Keynes seeing a 13% fall in the number of struggling businesses to 2,756. The fall is due to the lifting of the majority of Covid restrictions and the economy’s reopening although the figure is still 3% higher than the same period in 2020.
But insolvency firm Begbies Traynor, which carried out the research, has warned that “considerable” challenges lie ahead for businesses.
These include constrained raw material availability, rising inflation, labour shortages, spiralling energy prices and the winding back of government Covid support measures – any or all of these could yet impact failure rates during the rest of 2021 and beyond, the firm says.
Julie Palmer, a partner at the firm’s office in Milton Keynes, said: “The quarterly fall in significant financial distress is welcome news and provides some breathing space for hard-hit Milton Keynes businesses. However, concerns remain that trading conditions will deteriorate for many companies, with rising CCJ figures an early indicator that some suppliers are running out of patience with customers stretching payment terms.”
The end of the government’s Covid support measures introduced by Chancellor of the Exchequer Rishi Sunak are among the challenges facing businesses, says Begbies Traynor.
Nationally, the latest Red Flag Alert research for Q3 2021 has recorded 562,550 businesses in ‘significant distress’, a 14% fall since Q2 2021. However, the figures showed that, despite the Q3 improvement in the financial performance of businesses, the number of significantly distressed companies is still 15% higher than pre-pandemic.
There are also concerns in a steep rise in CCJs – often a bellwether for future insolvency. Official data shows 9,101 CCJs lodged against companies during Q3 2020, rising to 21,769 during Q3 2021, an increase of 139%.
“Despite the summer economic boom, systematic problems remain and many businesses face a long-term struggle with repaying government-backed Covid loans,” said Ms Palmer. “However, the combination of inflation, energy costs and labour availability may prove to be the tipping point for some businesses, particularly if they are unable to pass these costs on to their customers.
“These risks, combined with the withdrawal of government support measures and protection, could make for a tough rest of 2021 which could continue into 2022.”