South West sees 21% year-on-year increase of businesses in distress
More than 48,000 companies across the South West 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, coupled with the impending impact of the tax, national insurance and national minimum wage increases announced in the October 2024 UK Budget, are all contributing to business stress in the region, with 48,065 at risk of economic failure. This represents a quarterly increase of 9.9%, and an annual rise of 21.3%.
Looking at the sector picture, there are 8,343 construction businesses in significant distress, making it the most troubled sector in the South West.
There have also been significant increases in the number of printing & packaging and food & beverage businesses facing difficulties, with these industries seeing annual increases of 97.7% and 45.8% respectively.
Nationally, the latest Red Flag Alert research for Q4 2024 recorded 654,765 businesses in significant distress, which is 21.3% higher than the same period in 2023. In addition, there has been a worrying surge in the number of businesses in the UK entering ‘critical’ financial distress in the final quarter of 2024, rising by 50.2% to 46,853 companies.
Paul Wood, partner at Begbies Traynor across the South West, says: “Even at this very early stage, the outlook for the rest of 2025 is challenging, and many companies are clearly struggling to adapt to the compounding issues they are facing. Unfortunately, there is no easy fix, which will be very unsettling for businesses who are struggling to tread water already.
“For many companies, which were already dealing with rising operational and borrowing costs, the increase in national insurance contributions and the national minimum wage announced at the last UK Budget, could result in further financial strain at a time when confidence is already low.
“So, in the absence of a reduced tax burden and a strong economic recovery, unfortunately it is likely that the number of insolvencies will continue to rise in 2025 as firms struggle to cope with a perfect storm of rising costs, financial instability and fluctuating market conditions.”
