SOS: Firms in financial distress hits record high, says reportAug 10, 2020
by ANDREW GIBBS e: firstname.lastname@example.org
MORE than 2,500 Milton Keynes businesses found themselves in “significant” financial distress during the government’s lockdown measures, according to the latest figures from independent insolvency firm Begbies Traynor.
Milton Keynes saw a 3% increase in the number of businesses struggling between Q1 and Q2 2020 to 2,540 – up by 10% on the same period in 2019.
The Red Flag Alert data for Q2 2020, which monitors the financial health of UK companies, reveals that nationally, a record 527,000 businesses are in significant financial distress – the seventh consecutive quarterly increase and a rise of 33,000 since the beginning of the year.
Begbies Traynor is also warning that the true number could have been much higher were it not for reduced court activity due to the coronavirus pandemic, which has substantially reduced the number of CCJs and other legal action being taken against indebted companies.
In Milton Keynes, businesses in some sectors faced greater financial difficulty than others, including professional services and support services, with the number in distress increasing by 9% and 5% respectively between Q1 and Q2 2020.
Even though some sectors showed some signs of relative stability – including telecommunications & IT and health & education – many businesses will be bracing themselves for further slowdown in Q3.
Marco Piacquadio, partner at Begbies Traynor in Milton Keynes, said: “These are undoubtedly the toughest of times for all businesses. While the latest figures from our Red Flag Alert show that there has been a relatively small increase in the number of ailing companies here in Milton Keynes over the past quarter, the true picture of financial distress may be concealed by inaction on insolvent and distressed businesses in the courts.
“This means we are more likely to see the real impact of the pandemic during the second half of 2020.
Support measures from the Treasury for businesses during the pandemic, with both the furlough scheme and access to government backed funding schemes, have been “unprecedented”, he added.
“But unfortunately, as the Chancellor himself has admitted, not all businesses and jobs can be saved. While it is likely that this situation will get worse for many businesses before it gets better, those businesses that have the capital and the management ability will be better placed to adapt to the ‘new normal’.
“Even before the crisis hit, change had been coming, but the pandemic has increased the pace of this change. We have already seen some businesses make significant alterations to their structures and we will expect to see more in the coming months.
“But a crisis can be an opportunity. We are in for hard times but if this is a catalyst for change it could result in a better, more sustainable future.”