Tens of thousands of UK firms could go bust after record rise in financial distress
Tens of thousands of UK firms could go bust after record rise in financial distress
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An insolvency expert has warned that UK businesses could be tipped "over the edge" in light of new data showing a record-breaking increase in the number of companies facing severe financial peril. Consumer-driven sectors, notably hotels, leisure, and retail, are especially struggling, according to advisory firm Begbies Traynor. Their latest Red Flag Alert report indicates roughly 46,850 businesses were in dire financial straits in the last quarter of 2024—a 50% surge from the figure reported in the preceding quarter.
Julie Palmer, a partner at Begbies, remarked that this rise spans almost all sectors, marking an "unprecedented level of growth in the number of firms who are at serious risk of entering insolvency in the next 12 months" The spike in distress was especially pronounced in hotel and accommodation services with an increase of nearly 84%, leisure businesses up by 76%, and retailers witnessing a nearly 50% rise.
"After a disappointing Christmas, consumer-facing industries, in particular, are feeling the strain, with rising operational costs and higher wages adding to an already difficult situation," said Ms Palmer. "With many such businesses already operating on thin margins, I fear the current situation will undoubtedly push some over the edge.".
As 2024 wrapped up, the construction industry had the grim distinction of the most businesses in both "critical" and "significant" financial distress, with more than 100,000 in total. Construction firms and developers have been warning about a downturn in the housing market, rising building costs, and cautious spending. Ric Traynor, Begbies' executive chairman, stated many businesses face higher national insurance contributions and staff wage increases due to the higher national minimum wage this year.
