South West sees 27% year-on-year increase of businesses in distress

Almost 43,800 South West companies are now classed as being in ‘significant’ economic distress, according to the latest figures from Begbies Traynor’s ‘Red Flag Alert’, which monitors the financial health of UK companies.

Ongoing economic uncertainty, inflationary pressures and debt burdens, along with persisting weakness in consumer confidence, are all contributing to business stress in the South West with 43,757 at risk of economic failure. This represents a quarterly increase of 4%, and an annual rise of 27.5%.

Looking at the sector picture, there are 7,338 construction businesses in significant distress, making it the most troubled sector in region.

There have also been significant increases in the number of food & beverage and retail businesses facing difficulties, with these industries seeing annual increases of 44.5% and 41.5% respectively.

Nationally, the latest Red Flag Alert research for Q3 2024 recorded 632,756 businesses in significant distress, an increase of 32.3% on the same period in 2023. Meanwhile, the number of businesses in ‘critical’ financial distress has decreased, with a quarterly fall of 23.2% to 31,201 and a year-on-year drop of 17.3%.

Paul Wood, partner at Begbies Traynor in the South West, says: “There is no hiding from the fact that 2024 has been hard to navigate for companies, and the final quarter looks no different, as a high degree of uncertainty weighs on the UK economy. While the decline we have seen in ‘critical’ financial distress at a national level is a welcome surprise after a challenging year, it is too early to say if this is a trend that will continue into the autumn – traditionally a busy period for corporate insolvencies.

“While there are tentative signs of a recovery, uncertainty continues to loom over South West businesses. In response, many business leaders are holding their breath as they await clarity over what the forthcoming Budget will bring.

“With wider geopolitical issues also having an impact, the only certainty is uncertainty, and we know this is bad for both business and investment alike. Combine this high level of uncertainty with the expectation of higher business costs post the Autumn Budget and it is clear that the economy is far from being out of the woods.”