Tens of thousands of so-called “zombie” businesses could collapse this year as mounting cost pressures and weak demand push companies to breaking point, insolvency specialists have warned.
New research from Begbies Traynor shows a sharp rise in businesses experiencing severe financial strain, with a 44 per cent increase in companies classed as being in “critical financial distress” in the final three months of last year compared with the same period in 2024.
In total, 67,369 companies were identified as facing critical distress, according to Begbies’ latest Red Flag Alert report. The long-running study analyses public filings such as county court judgments and company accounts, alongside Begbies’ own financial stress scoring, to assess sustained deterioration in key financial indicators.
The hospitality sector was among the hardest hit, following a difficult Christmas trading period marked by weaker consumer spending. Hotels saw a 54 per cent increase in businesses showing signs of critical distress over the past year, while bars and restaurants recorded a 39 per cent rise.
Begbies said companies across the economy were continuing to “grapple with a prolonged period of economic uncertainty”, compounded by rising operating costs from higher wages, elevated interest rates, increased tax burdens and subdued consumer demand.
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