Over 47,000 UK businesses are on the brink of collapse after a 25 percent surge in companies facing “critical” financial distress in the final quarter of 2023.
It marks the second consecutive quarter-on-quarter increase of this magnitude, the latest “Red Flag” report by insolvency specialists Begbies Traynor found.
The construction and property sectors are bearing the brunt, accounting for 30 percent of businesses on the brink.
The quarterly rate of critical financial distress in the construction industry rose by 32.6 percent.
Health and education saw a 41.3 percent spike, real estate and property services faced a quarter surge and a 24 percent uptick in support services.
Julie Palmer, a partner at Begbies Traynor, attributes this alarming scenario to a “perfect storm” created by tough macroeconomic conditions.
She said: “After a difficult year for British businesses that was characterised by high interest rates, rampant inflation, weak consumer confidence and rising and unpredictable input costs, we are now seeing this perfect storm impact every corner of the economy.”
The Bank of England’s interest rate hike, soaring from 0.1 percent at the end of 2021 to 5.25 percent, has significantly increased borrowing costs for UK businesses.
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It prevented many from relying on cheap debt to navigate financial challenges.
The report underscores that 539,900 UK firms were grappling with “significant” financial stress by the end of the last year, reflecting a 12.9 percent increase from the third quarter of 2023.
Geographically, businesses facing critical financial distress are predominantly located in London and the south-east, with the fewest instances in the north-east and Northern Ireland.
The top 10 sectors witnessing firms in “critical” financial distress
- Construction
- Support services
- Real estate and property services
- Professional services
- General retailers
- Telecoms and IT
- Health and education
- Media
- Financial services
- Food and drug retailers
