Huge rises in numbers of distressed firms across East Midlands

Derby, Leicestershire and Nottingham have all seen major increases in the number of businesses in distress, according to new figures.

Begbies Traynor says that over 12,000 businesses are in “significant distress” across the three cities, using data collected in the second quarter of this year.

The majority of the struggling companies were in Leicestershire (8,843) – however, this is a county-wide figures, while the others for Nottingham (2,446) and Derby (726) show numbers from the respective cities only.

In Leicestershire and Derby, support services businesses were most affected while the construction sector saw major increase in significant distress. There was a similar picture in Nottingham, with health and education businesses also struggling.

The figures show a rise of 41% in Derby, 39.1% in Leicestershire and 37.% in Nottingham.

Nationally, the latest Red Flag Alert research for Q2 2024 recorded 601,950 businesses in significant distress, which is 36.9% higher than the same period in 2023. During Q2 2024, “critical” financial distress also increased year-on-year by 34.5% to 40,613 companies, with a large number expected to enter insolvency over the next 12 months. This is being driven by notable increases in sectors such as automotive, transportation and logistics and bars and restaurants.

In a joint statement Kris Wigfield and Martin Buttriss, partners at Begbies Traynor, said: “It looks like 2024 will prove to be another tough year for businesses. We are a little over halfway through the year and the macro-economic environment remains extremely testing, with the latest Red Flag Alert data highlighting a substantial increase in the number of businesses in significant financial distress in comparison to this time last year.

“A continuation of falling inflation levels will be especially helpful for businesses, particularly if interest rates begin to inch backwards later this year.

“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. However, 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.

“In short, the prevailing economic situation means that we still expect to see heightened levels of company insolvencies extend into 2025 and beyond.”