Yahoo Finance 40,000 companies are close to collapse, insolvency experts say — These are the sectors most at risk
More than half a million UK companies are in “significant” financial distress, and more than 40,000 in “critical” distress, according to insolvency experts Begbies Traynor’s latest “red flags” report.
The report found that 554,554 companies were in distress, up more than 30% from last year, and up a little from the fourth quarter of last year.
The number of firms in “critical” distress was slightly lower than at the end of last year, but still very high by historical measures at 40,174.
High interest rates have been a challenge for businesses, as borrowing becomes more challenging, while customer sentiment remains weak. Businesses in some sectors have also had difficulty recruiting.
London has the most at-risk firms of any region in the country, with 12,089 in critical distress and 157,156 in significant distress.
Julie Palmer, Partner at Begbies Traynor, said: "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.
"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.
"As with the prior quarter, the picture is particularly concerning in the consumer facing sectors. We are starting to see this translate into larger companies entering insolvency, a trend that I expect to continue while consumer confidence remains uncertain. On top of that, the higher levels of financial distress in bellwether sectors such as real estate and construction point to a troubled UK economy.”
Ric Traynor, Executive Chairman of Begbies Traynor, said: "Unfortunately, there's no quick fix for our economy and with inflation falling slower than expected, hope of the Bank of England cutting interest rates significantly in the near future seems to be fading.
"Sadly, the pressing issues facing businesses today will simply push many over the edge and contribute to the current high level of UK corporate insolvencies."
Take a look at the graph below for the most at-risk sectors.
