The business environment for UK firms is still “extremely testing”, according to a quarterly snapshot of corporate health.
Begbies Traynor’s Red Flag Alert shows that in the second quarter of 2024 the number of UK companies classed as being in ‘significant’ financial distress jumped by 8.5% to 601,950 businesses, compared with 554,554 in the first quarter.
This acceleration was driven in particular by the Travel & Tourism (+20.1%), Hotels & Accommodation (+16.4%) and Bars & Restaurants (+12.2%) sectors, reflecting the ongoing weakness of consumer confidence.
Another 40,613 UK businesses were reported to be in ‘critical’ financial distress, up 1.1% on the prior quarter, including increases in the Automotive (+13.2%), Industrial Transportation & Logistics (+12.2%), Health & Education (+8.4%) and Bars & Restaurants (+7.3%) sectors.
These firms are in the greatest difficulty and a large number of them are expected to enter insolvency in the next 12 months.
“We are a little over halfway through the year and the macro-economic environment for UK companies remains extremely testing,” warned Ric Traynor, executive chairman of Begbies Traynor.
“There might be a greater sense of optimism in certain corners of the economy, but this is yet to translate into anything meaningful for the hundreds of thousands of businesses fighting for survival.”
Traynor added that political certainty after the general election should result in some momentum starting to build this summer, and businesses will welcome a continued fall in inflation and an anticipated cut in interest rates.
“Beyond these small glimmers of hope, all eyes are now on our new government as we ask ourselves what they can do to kickstart economic growth in the UK.
“Sadly, the reality is that the government may not be able to act fast enough to stop many struggling businesses from succumbing to the economic pressures with which they are currently grappling.”
