According to insolvency experts, there has been a record increase in the number of businesses in the UK facing severe financial distress. Concurrently, consumer confidence has also declined as more people become concerned about the UK's financial outlook and their own personal finances.
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02-13, 2025In its latest report, insolvency specialists at Begbies Traynor stated that a company can be considered in severe financial distress if it has more than £5,000 in outstanding county court judgments or faces a winding-up petition. Businesses in the hospitality, leisure, and retail sectors have been among the hardest hit.
While there is usually an increase in the number of companies in severe financial distress towards the end of the year, the report found a historic 50% surge in this figure between September and December 2024, bringing the total number of companies in this category to 46,583. One contributing factor is that Her Majesty's Revenue and Customs (HMRC) has become more aggressive in pursuing overdue tax payments.
Additionally, the number of UK businesses deemed to be in significant financial distress also rose by 3.5% compared to the previous quarter, reaching 654,765. Ric Traynor, executive chairman of Begbies Traynor, said, "Following the historic rise in severe financial distress in the final quarter of 2024, it's clear that many struggling UK businesses are finding it almost impossible to cope with the challenges they face at the start of 2025."
"For many businesses already facing weak consumer confidence and rising borrowing costs, the increases in national insurance contributions and the national minimum wage announced in the last budget may prove to be the final straw." He also stated that businesses in sectors such as retail and hospitality may be particularly affected as they often "operate on wafer-thin margins." He added, "I fear that 2025 may ultimately prove to be a watershed moment, with thousands of UK businesses ‘calling it a day’ after struggling for years."
Another report shows that consumer confidence in their personal finances has slightly declined, while confidence in the broader economic outlook has dropped significantly. A long-term survey by GfK indicates a decrease in people's willingness to purchase big-ticket items, while the number of those considering putting money into savings has increased. GfK stated that this is a negative signal for the economy, as it suggests that many people see a bleak future and are saving for security.
Neil Bellamy, consumer insight director at GfK, said: “The New Year is usually a time for change, but from these figures, consumers don’t see things getting better. These figures highlight that consumers are losing faith in the UK’s economic outlook.”
