The number of UK businesses facing “significant” financial distress rose sharply in the latest quarter, but some relief may be on the horizon, according to the latest survey by Manchester insolvency practitioner Begbies Traynor.
632,756 UK businesses are currently in ‘significant’ financial distress, according to the survey, up 5.1% on the prior quarter and 32% higher than a year ago. The sectors most affected were utilities, food and drug retailers, financial services and bars and restaurants.
The latest Begbies Traynor Red Flag Alert research, which has provided a snapshot of British corporate health for almost two decades, highlights the challenging conditions UK businesses continue to face.
Julie Palmer, Partner at Begbies Traynor, said: “With the end of the year now in sight, many British companies must be looking ahead to the finish line with a cautious degree of optimism for what 2025 has to offer after a difficult year. So far, there is no hiding from the fact that 2024 has been hard to navigate for companies and the final quarter looks no different as a high degree of uncertainty weighs on the UK economy.”
“It is also apparent that the toxic effect of high inflation is still filtering down to businesses. The construction sector in particular continues to struggle with the legacy of high materials and labour inflation which have led to some high-profile insolvencies recently. This is a trend that I expect to continue, and I do not believe ISG will be the only major casualty in this sector with the domino effect likely to hit the sub-contractor community in due course.”
“For some, the prospect of a change of government was viewed as a potential catalyst for a much-needed economic boost, but there are significant concerns surrounding what the next Budget might hold for the economy and the knock-on effect could be damaging for many businesses teetering on the edge of collapse, as it seems certain many will have to deal with higher employee related taxes.”
On the upside, the number of businesses in “critical” financial distress fell 17% from a year ago.
Ric Traynor, Executive Chairman of Begbies Traynor, said: “As we move into the final quarter of 2024, the decline we have seen in ‘critical’ financial distress is a welcome surprise after a challenging year. That said, it is too early to say if this is a trend that will continue into the autumn – traditionally a busy period for corporate insolvencies.”
“While there are tentative signs of a recovery, uncertainty continues to loom over UK businesses. In response, many business leaders are holding their breath as they await clarity over what the forthcoming Budget will bring.”