A record number of UK companies are fighting for their financial survival as an uncertain economic outlook undermines business confidence, according to figures released on Friday by corporate restructuring firm Begbies Traynor.
Begbies Traynor’s Red Flag Alert report for the third quarter of 2024 revealed that 632,756 companies are now classified as being in “significant” financial distress, an increase of 32 per cent compared to the same period last year. This rise indicates that businesses are being affected by high inflation and debts left over from the pandemic.
Julie Palmer, partner at Begbies Traynor, emphasised the widespread nature of the crisis. She said:
“With over 630,000 firms now in significant financial distress, more than 30% higher than this time last year, no section of the country’s economy is immune from the legacy debt built up by many businesses during the pandemic. The toxic effect of high inflation is still filtering down to businesses.”
Almost all industries analysed in the report saw an increase in financial problems, with utilities companies seeing the sharpest increase – up 19.3 per cent year-on-year. Food and drug retailers (+10.4%), financial services (+9.94%), and bars and restaurants (+8.7%) also suffered.
However, there was a positive note in the report: there was a 17% decrease in the number of businesses categorised as “critically distressed” – those on the verge of bankruptcy – compared to the previous year.
Palmer warned that some sectors, particularly construction, remain under severe pressure from rising material and labour costs, and more insolvencies are expected, particularly among subcontractors.
