The UK is witnessing an unprecedented surge in companies experiencing severe financial difficulties, as they struggle to cope with numerous challenges, reports an insolvency expert.

In the last quarter of 2024, the number of businesses in critical distress soared by 50.2% compared to the previous quarter, reaching a total of 46,853, according to data from Begbies Traynor.

This insolvency specialist highlighted that the construction sector is particularly hard-hit, with 6,830 companies showing significant signs of distress.

Consumer sectors are also grappling with heightened financial pressure, with the leisure industry seeing a staggering 76% increase in distress, while general retailing experienced a 48% rise. The sector has suffered several high-profile failures over the past year, including well-known names like Homebase, Carpetright, and The Body Shop, leading to considerable job losses.

Ric Traynor, executive chairman of Begbies Traynor, noted that the data reflects the extreme challenges facing many distressed UK businesses as 2025 unfolds.

He remarked, “For numerous companies already plagued by weak consumer confidence and escalating borrowing costs, the recent hike in national insurance contributions and the national minimum wage—announced in the latest budget—could prove disastrous.””

The research incorporated financial distress indicators such as county court judgments for unpaid bills and winding-up petitions filed by creditors against businesses.

Julie Palmer, a partner at Begbies Traynor, stated, “Almost every sector is experiencing an extraordinary rise in firms at imminent risk of insolvency in the coming year.””

She emphasized that the consumer-facing sectors, particularly following a lackluster Christmas, are under immense pressure, with rising operational costs and increasing wages exacerbating an already precarious situation. “Many businesses operate on narrow profit margins, and I worry that the current circumstances will inevitably lead some to fail.””

Despite a 5% decrease in overall corporate collapses, down to 23,872 in 2024, data from the Insolvency Service indicates that personal insolvencies rose by 14%, increasing from 103,434 to 117,940. Tim Cooper, president of R3, the trade organization for insolvency and restructuring professionals, highlighted that this trend signifies a significant and urgent issue regarding consumer debt in the country.