Historic jump in number of companies in serious financial distress

Insolvency experts say there has been a record rise in the number of UK businesses in serious financial trouble.

At the same time, consumer confidence fell as more people became worried about the UK's financial future and their own.

A company may be considered to be in serious financial distress if it has outstanding county court judgments of more than £5,000 or faces a winding-up application, insolvency experts at Begbies Traynor said in a new report.

Businesses most in difficulty include hospitality, leisure and retail.

While the number of companies in severe financial distress often surges at the end of the year, the report found that the number of companies in this category increased by 50% from September to December 2024, reaching a record high, bringing the number of such companies to 46,583.

One factor is that HMRC has become more aggressive in recovering overdue tax.

The number of UK companies considered to be in serious financial difficulty also increased by 3.5% from the previous quarter to 654,765.

Ric Traynor, executive chairman of Begbies Traynor, said: “Following a historic rise in severe financial distress in the final quarter of 2024, it is clear that many struggling UK businesses are finding it almost impossible to cope with the challenges they face at the start of 2025. “

“For many businesses already facing weak consumer confidence and rising borrowing costs, the increases in national insurance contributions and the national minimum wage announced in the last Budget may be the final straw.”

He said sectors such as retail and hospitality were particularly likely to be affected as they often had “thin margins”.

He added: “I fear that 2025 could end up being a watershed year, with thousands of UK businesses 'finished' after years of struggling to survive.”

A separate report showed consumers' confidence in their own financial health fell slightly, while confidence in the overall economic outlook fell sharply.

GfK's long-term survey shows that people are less willing to buy big-ticket items, while more people are considering putting money into savings.

GfK said this was bad for the economy because it suggested many people saw dark days ahead and were saving money to be safe.

Neil Bellamy, consumer insights director at GfK, said: “New Year is traditionally a time for change, but judging from these figures, consumers don’t think things are getting better.

“These figures highlight consumers' loss of confidence in the UK's economic prospects.”