TENS of thousands of companies are on the brink - less than three months after the Treasury unveiled substantial increases to taxes and wages. A shocking new report reveals a staggering 50% surge in the number of companies facing "critical" financial distress, jumping to a record 46,853 in the last quarter of 2024.
Experts at insolvency firm Begbies Traynor warn this could be just the tip of the iceberg, with thousands more businesses predicted to go bust in 2025. All 22 sectors assessed by the business in its Red Flag alert saw an increase in critical financial distress.
In the context of business finances, "critical distress" indicates a severely negative financial situation where insolvency is highly likely in the near future. The high street is bearing the brunt of the crisis, with consumer-facing businesses struggling to cope with the perfect storm of rising costs, weak consumer confidence, and higher borrowing costs.
Hotels and accommodation saw an 83% rise in critical distress, leisure and cultural activities jumped by 76%, and general retailers weren't far behind with a 47% increase. Even the usually resilient food and drug retailers saw a worrying 37% rise in distress.
Experts fear a bleak Christmas trading period has pushed many of these businesses, already operating on wafer-thin margins, to breaking point. The pain isn't confined to the high street. Key sectors like construction and real estate, often seen as bellwethers for the wider economy, are also showing alarming signs of distress, with critical distress soaring by 58% and 63% respectively.
