The number of UK businesses in critical financial distress increased by 50.2% quarter-on-quarter, to 46,853 in the final quarter of 2024, up from 31,201 in Q3 2024.
Of the 22 sectors analysed, 21 saw a significant quarter-on-quarter rise in businesses facing “critical” financial distress, according Begbies Traynor’s latest Red Flag Alert report.
This increase was especially concerning in consumer-facing sectors, with hotels & accommodation (+83.63%), leisure & cultural activities (+76.46%), general retailers (+47.6%), and food & drug Retailers (+37.4%) all seeing huge increases.
Key sectors, including construction (+58%) and real estate & property services (+63.4%), have seen troubling rises in critical financial distress, now accounting for nearly 30% of all businesses in this category.
At the end of 2024, London topped the list for regions with the highest number of businesses in critical financial distress, with 14,326 businesses affected.
The South East followed closely with 7,499 distressed firms, while the West Midlands had 5,600.
The latest findings highlight a worsening UK economy.
By the end of 2024, the sectors with the highest number of businesses in “significant” financial distress were construction (97,603), support services (90,375), and real estate & property services (75,394).
Ric Traynor, executive chairman at Begbies Traynor, said: “After an historic rise in critical financial distress in Q4 2024, it’s clear that many distressed UK businesses are finding it almost impossible to navigate the challenges they face as we start 2025.
“For many businesses which were already dealing with weak consumer confidence and higher borrowing costs, the increase in national insurance contributions and the national minimum wage, announced at the last Budget, could be the last straw, particularly in labour-intensive sectors like retail and hospitality, which typically operate on razor thin margins,” he added.
“So, I fear 2025 could end up being a watershed moment when thousands of UK businesses call time after struggling to survive for years.”
Photo by Simon Belcher/imageBROKER/Shutterstock (4557084a)
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