Alarming jump in North West firms in critical financial distress following Autumn Budget
The latest Red Flag Alert report from Begbies Traynor reveals a worrying surge in the number of businesses in the North West entering ‘critical’ financial distress in the final quarter of 2024.
In Q4 2024, ‘critical’ financial distress rose by 49% to 4,927 companies – less than three months after Chancellor Rachel Reeves’ Autumn Budget which raised the Living Wage and employers’ National Insurance costs.
All the 22 sectors covered by Red Flag Alert, saw a noticeable increase quarter-on-quarter in the number of businesses in ‘critical’ financial distress.
The growth in distress was particularly concerning in consumer-facing sectors with Hotels & Accommodation (+64%), Leisure & Cultural Activities (+125%), General Retailers (+32%) and Sports & Health Clubs Food (+38%) all playing a key role in the growth during the period.
After another challenging year, ‘significant’ financial distress rose by 20% to 67,030 in Q4 2024 versus the same period in 2023 (Q4 2023: 55,928), as the uncertain economic environment continued to add pressure on businesses.
At the end of 2024, the sectors experiencing the highest numbers of businesses in ‘significant’ financial distress include the Construction (9,684), Support Services (10,055), and Real Estate & Property Services sectors (7,483).
Dean Watson, partner at Begbies Traynor in Manchester, said: “After a challenging festive season, businesses across the North West, especially those reliant on direct consumer spending, are under mounting pressure.
“Escalating operational costs and rising wages are compounding the difficulties many firms are already grappling with, and for those operating on narrow profit margins, the strain is reaching critical levels.
“With consumer confidence remaining unpredictable and borrowing costs seemingly fixed at higher levels for the foreseeable future, the business environment feels increasingly fragile.”
He added: “This has been further exacerbated by the October 2024 UK Budget’s tax increases and the uplift in the national minimum wage, placing an even heavier financial load on companies in the region.
“As we look ahead, 2025 appears deeply uncertain for North West businesses. Many are battling to adapt to a relentless combination of financial pressures and unpredictable market conditions. Unfortunately, without meaningful relief, such as reduced taxes or stronger economic growth, the rising trend of business closures seems inevitable.”
He said: “Already, the signs are alarming. For countless firms across the region, the reality is bleak.
“Leaders face impossible choices, whether to downsize operations or, in some cases, shutter entirely.
“With talk of an emergency tax hike in the Spring Budget still lingering and potential international tariff increases looming, the road ahead feels fraught with risk.
“It’s not inconceivable that 2025 could become a tipping point, with countless more businesses in the North West forced to close their doors after years of relentless challenges.”
