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THE BUSINESS HAD EMPLOYED HUNDREDS OF STAFF AT ITS HEIGHT JON ROBINSON North West Business Editor 11:54, 17 May 2023Updated 11:54, 17 May 2023 More than £3.5m was owed by a Covid-19 testing
firm when it collapsed into administration despite earning millions from the pandemic. At its height, Circular 1 Health had employed 300 people, turning over more than £35m and achieving a
pre-tax profit of £6.4m. However, the company entered administration in March when Gary Lee and Kenneth Pattullo of Begbies Traynor were appointed to oversee the process. When it collapsed
Circular 1 Health, which had operations in Manchester and Carlisle, had shrunk down to employ just over 40 people. READ MORE: JOIN THE FREE MANCHESTER EVENING NEWS WHATSAPP COMMUNITY Now,
newly-filed documents with Companies House have revealed how much the business owed to its creditors when it entered administration and the reasons why it collapsed. HOW THE COMPANY OPERATED
DURING THE PANDEMIC The company was established in June 2020 having secured its first contract in the month before. Article continues below A statement sent to Begbies Traynor by company
director Stuart MacLennan said: "Throughout the height of the Covid pandemic the company worked closely with clients to deliver a service that allowed it to maintain ongoing activity in
key programmes by keeping staff at work and ultimately safe through continued screening. "Included in this model, the company spent four months working with Mitie for the Department of
Health and Social Care to seek to help stand up a mobile programme to support countrywide mass screening requirements. "This evolved as the pandemic did to then support a
business-to-business and business-to-customer capacity to some key travel providers allowing people to travel safe in the knowledge of Covid status. "In essence the company spent 2020
and 2021 working with clients to deliver key screening and testing services, including the unprecedented demand that the Omicron variant created in November 2021, where all providers were
asked to scale up as soon as possible to minimise risk to the country. READ MORE: CLICK HERE TO SIGN UP TO THE BUSINESSLIVE NORTH WEST NEWSLETTER "The result of the above was a company
with circa 300 employees by December 2021/January 2022. "In early January 2022 the government began to quickly relax restrictions at a time when all the scientific advice was to
maintain controls and as such the company began a rapid re-sizing of the business as quickly as possible whilst trying to balance meeting demand of remaining market and critical industry
clients." POST PANDEMIC AND THE SEARCH FOR INVESTMENT In January 2022 the company was asked by a client to develop a workforce health screening programme. It was developed and agreed by
April/May and the first pilot ran in June. In July an expanded scale up programme was agreed to be developed which "resulted in having to strike a balance on national capacity and cost
reduction whilst being ready for delivery". The statement from Mr MacLennan added: "Following the positive feedback on the pilot and the plan to scale up over Q4 2022 and into
2023, the company began the project of seeking investment to help move the business forward. "In July 2022 the company began to consult with BTG Advisory to help navigate the transition
phase acknowledging that without investment and customer commitment the ability of the company to continue trading would be highly improbable. "Throughout H2 2022, the company worked
hard to bookbuild the investment, securing an initial package of EIS investors and convertible loan note pledges of support. "Both investment types required a cornerstone investor and
the company engaged with a Jersey group who were going to be that as part of a scale up programme which would have the model at core and key team delivering. "Management worked with
this group all through Q4 2022 to get across the line but the deadline kept moving out. "In December 2022, the company was introduced to an individual who had been successful in putting
programmes into workforces across the UK and US. "The company had been working with that individual to seek cornerstone funding. "Parallel to this, two key personnel changes
occurred within the client's business that pushed the start date of a programme for them to the right and increased the company's business risk." The statement adds that on
March 3, 2023, the company was told that the client was not going to go ahead with the scale up programme. Begbies Traynor was approached to oversee the administration process three days
later. HOW MUCH DID THE COMPANY OWE? Unsecured creditors were estimated to be owed £2,412,485 which included £653,405 to HMRC in corporation tax and a further £6,631 in interest. HMRC was
also owed an estimated £541,544 for VAT, PAYE income tax, employee National Insurance contributions, student loan dedications and Construction Industry Scheme dedications. The company's
secured creditor was owed approximately £273,153 when it entered administration, however a credit balance was held of c.£9,397. Preferential claims of employees for arrears of wages, salary
and holiday pay was estimated at £158,700 and £129,099 for unpaid pension contributions. Begbies Traynor said it is currently uncertain whether any of the creditors will receive any of
their money back. When asked to comment on the new documents, a spokesperson for Begbies Traynor said: "We have submitted our proposals to creditors in line with our statutory duties
and we will continue to update them with progress accordingly." READ MORE: Article continues below