Almost 2,700 businesses in Milton Keynes now in 'significant financial distress' due to Covid pandemic

Sectors under particular stress in the city include real estate and property and construction, according to business recovery experts, Begbies Traynor.

They used the Red Flag Alert system, an industry benchmark that measures and reports corporate financial distress, to discover that 2,685 businesses in MK reported significant financial problems during the third quarter of this year (July to September).

Companies with ‘significant’ problem status are classed as those with minor CCJs (of less than £5k) filed against them or those who have been identified by Red Flag’s proprietary credit risk scoring system.

Currently, restricted court capacity has limited the number of CCJs and winding up petitions being issued against indebted companies, say Begbies Traynor. But their experts have warned insolvencies could escalate when the system catches up.

UK-wide, there are 557,000 businesses in significant distress - up six per cent on the previous quarter (Q2) and nine percent since lockdown in March.

Milton Keynes saw a six percent increase in the number of businesses struggling between Q2 and Q3. This was up 12 percent on the same period in 2019.

In Milton Keynes, businesses in some sectors faced greater financial difficulty than others, including real estate & property and construction, which increased by 10 percent and 12 percent respectively between Q2 and Q3 2020.

And even though some sectors showed some signs of relative stability – including bars & restaurants – many businesses will be bracing themselves for what is to come over the next three to six months, say Begbies Traynor.

Marco Piacquadio, partner at Begbies Traynor in Milton Keynes, said: “Milton Keynes businesses continue to face multiple challenges – from unpredictable consumer demand to restrictions on the way they offer their services, as well as managing the direct health impact of the pandemic on their workforce. This is undoubtedly taking its toll, as reflected in these regional figures.

“It is noteworthy that the number of businesses in significant distress has grown substantially in the last three months, even with court capacity significantly reduced due to the pandemic. As such, there could be a significant number of insolvencies when the courts do get back to anywhere near normal capacity and attempt to clear the backlog of pending cases. This, combined with the end of the furlough scheme and other government support measures, is likely to have a material impact on the business failure rate."

Marco added: “Unfortunately, a combination of a grim economic data, and very poor trading conditions, particularly in the most vulnerable sectors such as hospitality will take its toll and this is expected to feed through to Q1 2021 as restrictions continue.”