Record number of businesses in financial distress
The number of UK businesses in significant financial distress is hitting a record jump, according to insolvency experts.
It comes at the same time as a decline in consumer confidence as more people worry about the UK’s financial prospects as well as their own.
In their latest report, insolvency experts at Begbies Traynor said a company could be considered to be in significant financial distress if they have an outstanding county court judgment of more than £5,000 or face a winding-up petition. Is.
The businesses most at risk include hospitality, leisure and retail.
While there is often a year-end jump in companies in significant financial distress, the report found a record increase of 50% from September to December 2024, taking the number of companies in this category to 46,583 businesses.
One factor was HMRC becoming more aggressive in recovering overdue taxes.
The number of UK businesses considered to be in significant financial distress also rose 3.5% on the prior quarter to 654,765.
Rick Traynor, executive chairman of Begbies Traynor, said: “Following a historic increase in significant financial distress in the final quarter of 2024, it is clear that many distressed UK businesses will find it almost impossible to navigate the challenges they face as 2025 begins. “
“For many businesses already dealing with weak consumer confidence and high borrowing costs, the increases in National Insurance contributions and the national minimum wage announced in the last Budget may be the last straw.”
He said sectors such as retail and hospitality could be particularly affected as they typically “operate on razor-thin margins”.
“I fear that 2025 could be a watershed moment where thousands of UK businesses ‘call time’ after years of struggling to survive,” he said.
A separate report showed a slight decline in confidence among consumers in their own finances and a very bullish outlook on the prospects for the broader economy.
GFK’s long-running survey showed people’s intentions to spend on big-ticket items increased, while the number of people considering putting money into savings increased.
GFK said that was a negative for the economy because it was a sign that many people saw dark days ahead and were putting money aside for safety.
Neil Bellamy, director of consumer insights at GFK, said: “The New Year is traditionally a time of change, but looking at these figures, consumers don’t think things are changing for the better.
“These figures underline that consumers are losing confidence in the UK’s economic prospects.”
