Half a million UK firms struggling

The number UK businesses fighting for survival has increased in the past year, according to insolvency firm Begbies Traynor.

A total of 554,554 firms — across all major sectors — were classed as being in ‘significant’ financial distress in the first quarter of 2024. This is up 30.8% compared with the same period last year.

Additionally, the more serious ‘critical’ financial distress leapt 20.1% compared to Q1 2023, with 40,174 firms affected. These are the businesses most at risk of collapse.

Despite a 15.4% fall in critical financial distress compared to Q4 2023, Begbies Traynor said that company insolvencies remain at “historically elevated levels” as servicing debt at higher interest rates takes its toll.

The report also noted that unless the economic backdrop improves, a large percentage of the businesses currently in significant financial distress are likely to progress towards critical financial distress and potential insolvency.

“Despite some optimism as we entered the new year, 2024 has so far been characterised by a continuation of the same pressures that plagued companies in the UK throughout 2023,” said Julie Palmer, partner at Begbies Traynor.

“Since the pandemic, hundreds of thousands of UK businesses depleted their financial reserves and loaded their balance sheets with increasingly unaffordable debt which for many may simply be too great to bear.”

Palmer added that many companies will be “pinning their hopes” on interest rate cuts later this year.