More than 1,700 Stoke-on-Trent businesses have found themselves in ‘significant’ financial distress during the past three months, according to a new report.
Insolvency firm Begbies Traynor has released its latest Red Flag Alert research for the third quarter (Q3) of 2020 – July to September – which shows that the Potteries saw 1,752 businesses struggling during the period. This represents a four per cent increase on the previous quarter and a 15 per cent increase on the same period in 2019.
In Stoke-on-Trent, businesses in some sectors faced greater financial difficulty than others, including support services and construction, both increasing six percent between Q2 and Q3 2020.
And even though some sectors showed some signs of relative stability – including telecoms and IT and automotive – many businesses will be bracing themselves for what is to come over the next three to six months.
Diane Dunion, partner at Begbies Traynor in Stoke-on-Trent, said: “Stoke-on-Trent 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.
“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.”
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Nationally, the research recorded 557,000 businesses in ‘significant distress’ after the largest quarterly leap since 2017.
This six percent increase from Q2 and comes despite a backlog of court action preventing many county court judgements (CCJs) and winding up petitions being issued.
Data shows there were 26,244 CCJs lodged against companies during March, April and May in 2019, with only 10,045 lodged during the same period in 2020, a fall of 62 percent.
The situation is even more acute with regard to more serious winding up petitions. During March, April and May 2019, 1,019 were lodged compared to 101 during the same period in 2020, a fall of 90 percent.