The final quarter of 2024 saw the fastest-ever increase in businesses teetering on the edge of collapse following a Budget severely undermining corporate confidence.
Recession anxieties are escalating as nearly 47,000 UK businesses find themselves in “critical financial distress,” according to insolvency experts at Begbies Traynor. This marks a 50% rise from just over 31,000 businesses in the preceding quarter, prior to Chancellor Rachel Reeves’s unexpected tax measures announced in late October.
Begbies Traynor’s Red Flag Alert report highlights struggles across nearly all sectors, with consumer-facing industries particularly hard-hit. Specifically, the number of hotels and accommodation providers in critical distress surged by over 80%, leisure and cultural businesses increased by more than 75%, and general retailers saw an almost 50% uptick.
Julie Palmer, a partner at Begbies Traynor, commented, “The situation feels very precarious” amidst declining consumer confidence and rising borrowing costs. She added, “This has been further aggravated by the tax hikes and the increase in the national minimum wage introduced in the October 2024 UK Budget, which imposed a £25 billion levy on employers’ National Insurance contributions. Consequently, the financial pressure on businesses is expected to intensify later this year.”
Palmer continued, “Even at this early stage, the outlook for the remainder of 2025 is uncertain at best. Many companies are clearly struggling to navigate the compounded challenges they face, and there is no straightforward solution, which is deeply unsettling for businesses already struggling to stay afloat.”
She concluded, “Without a reduction in the tax burden and a robust economic recovery, I anticipate that the number of insolvencies will continue to rise in 2025 as firms grapple with a perfect storm of increasing costs, financial instability, and volatile market conditions.”
