General retailers along with food and drug retailers are named among the top 10 sectors with firms facing “critical” financial distress, a new report has stated, highlighting that more than 47,000 UK companies are on the brink of collapse.
According to the latest “Red Flag” report by insolvency specialists Begbies Traynor, there is a 25 per cent jump in firms facing ‘critical’ financial distress, with property and construction sectors accounting for 30 per cent of all businesses facing critical financial distress.
The quarterly rate of increase in the number of companies facing critical financial distress grew by 32.6 per cent in the construction industry, by 41.3 per cent in health and education, a quarter in real estate and property services and 24 per cent in support services.
Julie Palmer, Partner at Begbies Traynor, 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 impacting every corner of the economy.
“Now that the era of cheap money is firmly a thing of the past, hundreds of thousands of businesses in the UK, who loaded up on affordable debt during those halcyon days, are now coming to terms with the added burden this will have on their finances.
“For some, a better-than-expected Christmas may kick these concerns down the road for a little longer, but the rapid growth in the levels of critical financial distress point to an economy that is waking up to the danger of debt ladened businesses in a higher rates environment.
“As we saw in the previous quarter, the strain being placed on companies has extended well beyond the consumer facing businesses with bellwether sectors, like construction and real estate, now in serious jeopardy as over 15,000 businesses face high risk of failure.
“Sadly, for tens of thousands of British businesses who should be looking ahead to 2024 with some degree of optimism, the new year will bring a fight for survival as the debt storm that has been brewing for years looks like it is breaking across the country.”
Top 10 Sector Ranking – Critical Financial Distress (Number of Companies in Critical Financial Distress)
- Construction (7,849)
- Support Services (7,096)
- Real Estate & Property Services (6,228)
- Professional Services (4,347)
- General Retailers (3,133)
- Telecommunications & Information Technology (2,830)
- Health & Education (2,719)
- Media (1,828)
- Financial Services (1,373)
- Food & Drug Retailers (1,343)
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