A record number of UK businesses are facing significant financial distress, underlining the precarious state of the economy as Chancellor Rachel Reeves prepares to unveil her first budget on 30 October.
A report by Begbies Traynor, the insolvency specialists, revealed that 632,756 companies were at substantial risk of failure in the three months leading up to September—an increase of nearly a third from the same period last year and a 5% rise compared to the previous quarter.
The Begbies Traynor Red Flag Alert report, which tracks key financial indicators such as profit retention, interest coverage ratios, and contingent liabilities, has recorded the highest level of business distress since its inception two decades ago. This surpasses even the figures seen during the global financial crisis in 2008.
Rising distress across industries
One of the key drivers behind the surge in corporate distress has been a sharp 20% rise in the number of utility companies at risk of collapse. This comes amid warnings from Moody’s, the credit rating agency, that major water companies, including Thames Water, may buckle under growing debt burdens unless they are allowed to substantially raise customer bills.
Retailers, particularly in the food and drug sectors, have also felt the strain, with a 10.4% increase in financial distress reported. Other sectors seeing sharp rises include financial services (9.9%) and bars and restaurants (8.7%). Out of the 22 sectors tracked by Begbies Traynor, 21 reported an uptick in distress levels over the last quarter.
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