More than 55,000 UK firms in severe distress, research shows

More than 55,000 UK companies are in serious financial distress and in danger of collapse without improvement over the coming year, according to research.

Experts have warned that the upcoming autumn Budget “must deliver urgent support to avoid a wave of failures”, particularly among small businesses.

The latest quarterly Red Flag Alert report by Begbies Traynor has revealed a 78% jump in the number of firms in “critical” financial distress to 55,530 in the third quarter of 2025, compared with a year earlier.

It said this also represented a 12.6% jump against the quarter to June, showing a sharply worsening situation for more than 6,000 businesses.

Consumer-facing businesses have come under particular threat in recent months, as they face pressure from rising labour costs and an uptick in inflation.

The data showed there was a 96.7% jump in leisure and cultural firms in a “critical” situations, with a 92.5% rise in hotels and accommodation, and 85.6% rise for retailers.

Begbies Traynor also found that the number of firms in “significant” financial distress increased by 14.8% year-on-year to 726,594 for the latest quarter.

It comes amid fears that the Chancellor Rachel Reeves could turn to tax increases to help address the fiscal black hole in the UK’s state finances.

Julie Palmer, partner at Begbies Traynor, said the woes of many UK businesses “shows the UK economy is in real trouble”.

She added: “With over 55,000 companies now in serious financial distress, the upcoming Budget must deliver urgent support to avoid a wave of failures, especially among SMEs already operating on a knife edge.

“Unfortunately for UK businesses, inflation is going nowhere, putting further pressure on companies at a time when wage, tax, and financing costs are already high.

“Many firms have no room to manoeuvre, and instead of investing for growth, are scaling back just to survive – the opposite of what the economy needs, if it’s going to recover and grow.”