The latest Begbies Traynor "Red Flag Alert" research, which has provided a snapshot of British corporate health for over 15 years, highlights the speed at which financial distress has accelerated over the last 12 months, with 554,554 UK businesses now in 'significant' financial distress - a 30.8% rise compared to Q1 2023. This deterioration now affects all 22 sectors covered by this latest research.
Additionally, the much more serious 'critical' financial distress has leapt 20.1% compared to Q1 2023, with 40,174 UK businesses affected. Despite a 15.4% fall in critical financial distress compared to Q4 2023 company insolvencies remain at historically elevated levels as servicing debt at higher interest rates takes its toll.
With many companies in 'critical' financial distress expected to enter insolvency over the course of the next 12 months, the picture in the Construction, Real Estate, Financial Services and Support Services sectors is particularly concerning as nearly 50% (c.20,000 businesses) of the companies in 'critical' financial distress are represented by these sectors.
Additionally, Red Flag Alert's historic data indicates that a large percentage of the businesses currently in 'significant' financial distress are likely to progress towards 'critical' financial distress and potential insolvency if the economic backdrop does not improve.