The latest Begbies Traynor ‘red flag alert’ identifies the sectors with the highest numbers of businesses most at risk of insolvency.
Overall, it found that the levels of ‘critical’ financial distress ‒ defined as having more than £50,000 worth of minor CCJs being filed against a business ‒ have risen sharply in the final quarter of 2023. In total, 47,000 businesses were found to be in this position, compared with almost 38,000 in the previous quarter.
Meanwhile, around 539,900 businesses in total were found to be in significant financial distress, up by 12.9 per cent on the previous quarter and 5.6 per cent higher on last year.
While every sector covered by the alert saw increases in the number of businesses in critical distress, certain sectors were particularly badly hit. These included construction, where numbers jumped by a third to 7,849, and real estate and property services, where the figure rose by a quarter to 6,228.
These two sectors are also towards the top of the significant financial distress tables, with more than 80,000 construction businesses and more than 60,000 property firms in this position.
Other struggling sectors include support services (82,431), professional services (51,412) and health and education (35,979).
Thousands at danger of insolvency
Julie Palmer, partner at Begbies Traynor, said that businesses were being impacted by a “perfect storm” of high interest rates, strong inflation and weak consumer confidence. She noted that hundreds of thousands of businesses who “loaded up on affordable debt” during the times of low interest rates are now having to come to terms with the added burden this will have on their finances.
She continued: “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.”
