Nearly 50,000 businesses now in critical distress, Begbies finds

Nearly 50,000 businesses are now in ‘critical’ financial distress amid volatile consumer spending, global economic turbulence and rising taxes on business, Begbies Traynor has found.

As of 30 June 2025, 49,309 businesses were in ‘critical’ financial distress, a 21.4% increase on Q2 2024 and an 8.6% increase on Q1 2025. 

According to the firm’s latest Red Flag Alert report, this rise was “felt in every corner of the UK economy”, with all 22 sectors covered by the report experiencing an increase over the last 12 months.

In particular, there was a “concerning” rise in ‘critical’ financial distress amongst consumer-facing sectors, including Bars and Restaurants (+41.7%), Travel and Tourism (+39.0%) and General Retailers (+17.8%).

After some signs of improvement in Q1, this latest research also showed a “noticeable decline” in the health of the UK economy in the second quarter of 2025, according to Begbies. 

Some of the economy’s key bellwether sectors saw critical distress rise “at pace” against Q2 2024, including the Support Services (+31.3%) and Construction (+15.8%) sectors.

The firm found that after a challenging second quarter, businesses in ‘significant’ financial distress rose by 10.8% year-on-year to 666,876 (Q2 2024: 601,950), which represents a 15.2% increase against Q1 2025 (579,276). 

There were “some positives” however, as six of the 22 sectors experienced a year-on-year fall in ‘significant’ distress, including Printing and Packaging (23.5%), Manufacturing (11.6%) and Industrial Transportation and Logistics (10.1%).

Julie Palmer, partner at Begbies Traynor, said: “Financial distress has intensified over the past twelve months in every corner of the economy. This means businesses across the UK are facing significant headwinds and many will have to review where they can tighten their budgets or restructure to give themselves more stability in the immediate future.

“This time last year, there was a degree of optimism amongst business leaders who were hoping to see a shift in fortunes in the second half of the year, but fast-forward 12 months and confidence is in short supply.”

She added: “Households are still grappling with their finances, and this is keeping consumer confidence volatile. The knock-on effect of this is clear to see in the consumer-facing sectors where margins are thin, growth is hard to come by, and the impact of higher employee costs is pushing many businesses to the brink of collapse.

“In the face of these headwinds, a large proportion of the 50,000 businesses currently in ‘critical’ financial distress need to urgently investigate their options if they are going to weather the storm. With no end in sight to the current economic malaise, I fear the financial burdens companies are enduring at present are simply too high for many not to avoid collapse.”