Report shows West Midlands businesses see rise in economic distress

New figures reveal that over 11,000 businesses in the West Midlands are in ‘significant’ economic distress, marking a 2.3% annual increase despite a 13.1% quarterly drop in the first quarter of 2025.

The latest data from Begbies Traynor’s Red Flag Alert shows 11,339 businesses in distress across the region.

Key areas such as Walsall (+13.1%), Birmingham (+2.8%), Stafford (+11.9%), and Dudley (+1.7%) have experienced annual increases in distress, even though the first quarter of 2025 saw quarterly declines of up to 14.7%.

On the other hand, Wolverhampton saw a decrease in distress numbers by 14.1% in the last quarter, leading to an 8.8% reduction year-on-year.

Real estate and property businesses are most affected, with a 17.9% rise in distress within this sector.

Other industries like construction (+1.1%) and general retailers (-13.5%) are also seeing significant distress levels.

Craig Povey, Partner at Begbies Traynor said: “There is some improvement in these figures and adds to economic readings of steady, if unexpected, progress across the UK. The bounce back in distress figures from the start of the year also demonstrates the resilience of businesses across the West Midlands.”

Nationally, over 579,000 businesses reported distress in Q1 2025, a decrease of 11.5% from Q4 2024, but still up 4.5% from the same period last year.

The number of critically distressed businesses fell by 3.1%, though it increased by 13% compared to the previous year.

Povey continued: “However, with tariffs, taxes and various other challenges weighing down on businesses – especially in sectors like construction, retail and property – there will remain caution from business leaders across the region and there will be administrations and liquidations on the horizon. In this climate, businesses should be looking at their past, present, and future income streams and getting help at the first signs of distress. For businesses – small and large – that manage to push through these headwinds, there may be opportunities uncovered as brighter skies emerge.”