Begbies Traynor’s latest Red Flag Alert, for Q3 2024, has found that the number of UK businesses in significant financial distress has risen by 32.3% compared with the same quarter last year.
It revealed that 632,756 companies are currently experiencing ‘significant financial distress’. This figure reflects the growing economic challenges faced by businesses across the country, the report said.
The Red Flag Alert found that distress levels rose in 21 out of 22 sectors compared with the previous quarter. Utilities saw a significant surge of 19.3%, while food & drug retailers and financial services increased by 10.4% and 9.94% respectively. Bars and restaurants were also affected, with an 8.7% rise.
Despite the increase in significant financial distress, the study found a reduction of businesses ‘in critical distress’. The number of critically distressed businesses fell to 31,201 in Q3, down 23.2% from Q2, and notably lower than the same period last year. This reduction was largely seen in the hotels and accommodation, construction, and real estate & property services sectors, which experienced decreases of 33.5%, 28.5%, and 26.5% respectively.
Begbies Traynor’s Julie Palmer said that businesses have faced challenging conditions throughout 2024. She said the high levels of distress as largely attributable to legacy debts from the pandemic and the ongoing influence of high inflation levels.
Palmer pointed to especially challenging conditions in the construction sector, which continues to struggle under the weight of high materials and labour costs, resulting in substantial insolvencies.
“This report underscores the urgent challenges facing UK businesses amid ongoing economic uncertainties, necessitating strategic resilience and adaptation in the coming months,” she said.
“This report underscores the urgent challenges facing UK businesses amid ongoing economic uncertainties, necessitating strategic resilience and adaptation in the coming months.”
Julie Palmer, Regional Managing Partner, Begbies Traynor
