Thousands in financial distress: Expect insolvencies, warns recovery firmAug 05, 2021
MORE than 3,000 businesses in Milton Keynes found themselves in “significant” financial distress during the second quarter of 2021, according to new figures.
However, after several steady quarterly increases, the city saw a 10% decrease in the number of struggling businesses between Q1 and Q2 2021 to 3,186, although this was significantly up – by 25% – on the same period in 2020.
Nationally, the latest Red Flag Alert research by independent insolvency firm Begbies Traynor for Q1 2021 has recorded 651,492 businesses in “significant distress”, up by 24% year on year. However, the release of pent-up consumer demand has brought the figure is down by one-tenth from the Q1 total, delivering a boost to business recovery.
In Milton Keynes, the number of companies suffering in the real estate and property and professional services sectors increased by 56% and 33% respectively year on year but the figures represent reductions respectively of 4% and 11%.
Begbies Traynor warns, however, that the outlook remains challenging. Court action is on the rise and September could spell a wave of insolvencies.
Julie Palmer, partner at Begbies Traynor in Milton Keynes, said: “These latest Red Flag figures may show a positive recovery in Milton Keynes, with pent-up consumer demand pulling some businesses out of harm’s way but the number of zombie businesses remains considerable, with many in a fragile state.
“Covid has dramatically accelerated the UK’s zombie business population, with many businesses taking on unsustainable government-backed debts during the pandemic in order to survive. With constant changes to the UK roadmap out of lockdown, many remain in a precarious position, with any future lockdowns likely to impact insolvency rates.”
‘Freedom Day’ on July 19, when the government eased most of the lockdown restrictions, has given many businesses a sense of normality, she added. But history suggests that unmanageable levels of debts and subsequent overtrading will eventually take their toll.
“Yet, the last quarter has demonstrated that it is not all doom and gloom for businesses,” Ms Palmer added. “Consumers want to spend, businesses want to expand and adaptation provides an opportunity for fresh shoots in the economy.”