Michelle ThompsonBegbies Traynor reports a 25% increase in enterprises encountering ‘serious’ financial trouble, particularly in the property and construction sectors.
More than 47,000 UK firms are on the verge of failure, with a 25% increase in the number of organizations suffering “critical” financial difficulties in the final three months of 2023, according to a report.
According to Begbies Traynor’s most recent “Red Flag” report, critical financial hardship has increased by 25% for the second consecutive quarter.
The construction and property industries accounted for 30% of all enterprises in significant financial difficulties.
The number of enterprises facing serious financial trouble increased by 32.6% in the construction industry, 41.3% in health and education, one-quarter in real estate and property services, and 24% in support services.
Eighteen of the 22 sectors evaluated by the survey saw a double-digit percentage increase in the number of enterprises in severe financial condition.
Julie Palmer, a partner at Begbies Traynor, stated that the challenging macroeconomic conditions had produced a “perfect storm” for UK businesses.
“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,” she told the BBC.
The Bank of England hiked interest rates from 0.1% at the end of 2021 to 5.25% in an attempt to control inflation. This has considerably increased the cost of borrowing for UK businesses, preventing many from covering up the cracks with cheap financing.
“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,” he said. “Sadly, for tens of thousands of British businesses who should be looking ahead with some degree of optimism, the new year will bring a fight for survival.”
The survey discovered that 539,900 UK enterprises were experiencing “significant” financial stress by the end of last year, up 12.9% from the third quarter of 2023.
The majority of enterprises in significant financial difficulties were based in London and the southeast, with the fewest in the northeast and Northern Ireland.
“Last year, the number of firms going bust had already reached the highest level since the great financial crisis [of 2008],” said Susannah Streeter, Hargreaves Lansdown’s head of money and markets. “A big chunk of those firms sending up alarm signals are expected to collapse over the next year, adding to expectations that a recession in the UK is imminent.”
