The number of UK businesses in critical financial distress has jumped by almost a tenth, according to research from Begbies Traynor Group (BTG). The latest quarterly red flag report found that 53,756 companies were in critical financial distress in the three months to the end of June, a 9% rise compared with the same period last year.
All but one of the 22 sectors covered by the research reported an increase in critical distress. Leisure and culture firms were the worst affected, with a 27.1% year-on-year rise, while hotel and accommodation businesses saw a 26.6% increase. Sports and health clubs recorded a 21% rise to 980, and food and drug retailers were up 18.4%. The number of firms in significant financial distress rose by 1.1% to 674,030.
The findings come against a backdrop of global economic uncertainty and rising costs.
Julie Palmer, managing partner at BTG, said: “The persistent rate of critical and significant financial distress in the UK is a clear sign that businesses are walking a tightrope as we move through the second half of 2026. While some may be getting used to operating in this challenging environment, it is highly unlikely that business leaders will be feeling optimistic. Indeed, any further increases to energy costs or inflation could accelerate financial distress and many will be thinking about restructuring or refinancing activities in a bid to improve their current situation.”
Ric Traynor, executive chairman at BTG, said: “Rising energy prices are likely to push inflation higher again this autumn, squeezing consumers just as borrowing costs remain elevated. That would be a difficult backdrop for most sectors, but especially those reliant on discretionary spending, where confidence is already fragile. Sadly, when confidence and spending remain subdued, I expect the resulting shockwaves to be felt across many other industries later this year and into 2027.”
