24th Jan 2025 11:13
(Alliance News) - The number of UK businesses in 'critical' financial distress jumped by 50% in the final quarter of last year, according to the latest 'Red Flag Alert' report from insolvency advisor Begbies Traynor Group PLC.
A total of 46,853 companies in the UK were in the 'critical' financial distress category in the fourth quarter, up from 31,201 in the third, Begbies said on Friday.
This was broad-based across the UK economy, it said, with 21 of the 22 sectors monitored by the Red Flag report showing substantial growth in distress. However, the biggest increase was in consumer-facing sectors, including hotels & accommodations, leisure & cultural activities, general retailers, and food & drug retailers.
The number of UK companies in the broader 'significant' financial distress category increased by 3.5% to 654,765 in the fourth quarter from 632,756 in the third. The highest number of companies in this category at the end of 2024 were in the construction, support services, and real estate & property services sectors, Begbies said. These three sectors also were the top three in total numbers in the 'critical' distress category.
"As we start a new calendar year, there is very little to be excited about. Across nearly every sector, there has been a unprecedented level of growth in the number of firms who are at serious risk of entering insolvency in the next 12 months," commented Julie Palmer, a partner at Begbies.
She added: "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. With many such businesses already operating on thin margins, I fear the current situation will undoubtedly push some over the edge."
Begbies Traynor shares were down 0.2% to 92.40 pence on Friday morning in London.
By Tom Waite, Alliance News editor
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