More than 47,000 firms have started 2024 on the edge of collapse, according to a new report.
Data compiled by accountancy firm Begbies Traynor revealed that 47,477 UK businesses were classed as being in a “critical” position in the fourth quarter of last year, up 26% on the previous quarter.
The third quarter itself had seen a similar rise from the previous three-month period.
All of the 22 sectors assessed by the insolvency specialist showed an increase in critical financial distress, highlighting how the current economic climate is having a detrimental impact on every part of the UK economy. The key sectors driving this increase continue to be construction, real estate and property, and support services, alongside health and education.
A “significant percentage” of the businesses identified as being in critical financial distress are thought likely to enter insolvency in the next year.
Another 539,900 businesses were classed as being in “significant” financial distress in the quarter, an increase of 13% on the previous three months.
British businesses faced a “perfect storm” of challenges last year, from high interest rates and surging inflation to weak consumer confidence and rising and unpredictable input costs, said Julie Palmer, a partner at Begbies Traynor.
“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.”