RCS - Begbies Traynor Grp - Latest Red Flag Alert Report for Q1 2025

Begbies TraynorAnnouncement

25/04/2025 07:00

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RNS Number : 1355G  Begbies Traynor Group PLC  25 April 2025

Friday, 25 April 2025

 

UK Businesses Under Pressure Ahead of Impending Tariff and Tax Changes

 

 'Critical' financial distress up by 13.1% year-on-year, despite 3.1%
decrease across first quarter of 2025

 

·      The number of businesses in 'critical' financial distress rose
13.1% year-on-year in Q1 2025, with 45,416 companies now affected (Q1 2024:
40,174)

·      This follows a 3.1% decline in the number of businesses in
'critical' financial distress versus Q4 2024 (46,853)

·      Consumer-facing industries - Bars & Restaurants (+31.2%) and
Travel & Tourism (+25.5%)  experienced the greatest increase in
'critical' financial distress over the last 12 months

·      Nearly two-thirds (14 of 22) of the sectors covered by Red Flag
Alert research experienced double-digit percentage growth of companies in
'critical' financial distress over the last year

·      'Significant' financial distress rose 4.5% year-on-year to
579,276 firms (Q1 2024: 554,554), despite an 11.5% fall from 654,765 in Q4
2024

·      Hotels & Accommodation (+15.4%), Real Estate & Property
Services (+12.1%) and Leisure & Cultural Activities (+9.5%) saw the
highest year-on-year growth in 'significant' financial distress

 

The latest "Red Flag Alert" report from Begbies Traynor, which has provided a
snapshot of British corporate health for almost two decades, highlights how
tens of thousands of UK businesses are struggling as the economy heads towards
major tariff and tax regime changes.

 

As of 31 March 2025, 45,416 businesses were in 'critical' financial distress -
a 13.1% rise versus Q1 2024, despite a 3.1% fall during the first quarter of
2025 (Q4 2024, 46,853). Nearly two-thirds (14 of 22) of sectors covered by Red
Flag Alert experienced a double-digit percentage increase of companies in
'critical' financial distress over the last year.

 

The picture is most concerning in the UK's consumer-facing economy where
'critical' financial distress leapt across Bars & Restaurants (+31.2%),
Travel & Tourism (+25.5%) and General Retailers (+12.4%).

 

Importantly, three of the bellwether sectors in the UK: Real Estate &
Property Services (6,480 companies), Construction (6,367 companies) and
General Retailers (3,401 companies), represented more than a third of the
companies in 'critical' financial distress, highlighting the perilous
situation for the UK economy.

 

Levels of 'significant' distress rose 4.5% in the last twelve months (Q1 2024,
554,554; Q1 2025, 579,276), despite the 11.5% decrease during the first
quarter of 2025 (Q4 2024, 654,765). The highest increase in 'significant'
distress since Q1 2024 was seen in the Hotels & Accommodation (+15.4%),
Real Estate & Property Services (+12.1%) and Leisure & Cultural
Activities (+9.5%) sectors.

 

Overall, 'significant' financial distress is most pronounced in the Support
Services (86,725), Construction (86,312) and Real Estate & Property
Services (68,744) sectors.

 

Julie Palmer, Partner at Begbies Traynor, said:

"As we progress through 2025, optimism remains in short supply for UK
businesses. The first quarter of the new year started positively with
unexpected economic growth figures, positive retail sales and cooling
inflation - and that is reflected in our latest data.

 

"Indeed, the travel and hospitality sectors may see an opportunity to attract
tourists looking to holiday somewhere else other than the United States.
However, every business in the UK will have their eyes fixed on the impact of
US tariffs and increases to homegrown taxes and that could make the situation
even worse.

 

"Worryingly, the consumer-facing corners of the economy, which have been on
the frontline over the last few years, are clearly continuing to struggle.
Bars & Restaurants have seen a 31.2% year-on-year increase in critical
distress, while Travel & Tourism is not far behind with a 25.5% rise.
These sectors, which are notorious for operating on tight margins, are bracing
themselves for further economic fallout from both domestic tax increases and
US tariffs which could push many over the edge.

 

"However, there is a small window of opportunity for business leaders who
stand at the crossroads and must decide which path to take. Restructuring,
refinancing, selling or closing will be options many will have to decide
between, so navigating towards the right outcome will be the target for 2025.
Sadly, I fear there will be many potholes that cannot be avoided later this
year which will prove too much for some."

 

Ric Traynor, Executive Chairman of Begbies Traynor, said:

"After a year characterised by weakening consumer confidence and the spectre
of a higher tax burden, 2025 looks like it will offer more challenges.

 

"Whilst the number of critically distressed businesses did fall in the first
quarter of 2025, it feels like this could be the calm before the storm as
uncertainty around US tariffs are likely to impact growth and suppress
profitability for some time. Businesses will be watching trade talks closely.

 

"Additionally, the recent increases to both employers' national insurance
contributions and the national minimum wage is likely to result in increased
distress levels later in the year as many marginal businesses struggle to
absorb further cost inflation.

 

"Ultimately, if the current pressures on businesses do not ease over the next
12 months, Red Flag Alert's data points to a large number of these critically
distressed businesses progressing towards formal insolvency."

 

-- ENDS --

 

 Most significantly Distressed Industries         Number of businesses in significant distress  Most critically distressed industries            Number of businesses in critical distress
 Support Services                                 86,725                                        Support Services                                 6,655
 Construction                                     86,312                                        Real Estate & Property Services                  6,480
 Real Estate & Property Services                  68,744                                        Construction                                     6,367
 Professional Services                            50,055                                        General Retailers                                3,401
 General Retailers                                39,905                                        Professional Services                            3,163
 Health & Education                               38,501                                        Health & Education                               2,720
 Telecommunications & Information Technology      37,414                                        Telecommunications & Information Technology      2,585
 Media                                            24,066                                        Bars & Restaurants                               1,941
 Financial Services                               16,502                                        Food & Drug Retailers                            1,797
 Leisure & Cultural Activities                    16,348                                        Media                                            1,700
 Significant distress by region                                                                 Critical distress by region
 London                                           165,271                                       London                                           14,889
 South East                                       99,663                                        South East                                       6,860
 Midlands                                         70,785                                        Midlands                                         5,379
 North West                                       60,504                                        North West                                       4,851
 Yorkshire                                        40,041                                        Yorkshire                                        3,209
 South West                                       41,164                                        South West                                       2,620
 East of England                                  37,215                                        East of England                                  2,681
 Scotland                                         28,657                                        Scotland                                         2,190
 Wales                                            15,735                                        Wales                                            1,228
 North East                                       10,677                                        North East                                       782
 Northern Ireland                                 9,513                                         Northern Ireland                                 725
 Misc                                             51                                            Misc                                             2

 

For further information, contact:

 

 MHP Communications:  07557 741 217

 Katie Hunt           07827 662 831

 Hugo Harris          BegbiesCorporate@mhpgroup.com (mailto:BegbiesCorporate@mhpgroup.com)

 

Notes to Editors

 

About Red Flag Alert

 

Red Flag Alert has been measuring and reporting corporate financial distress
since 2004. It has become a benchmark on the underlying health of companies
across every sector and region of the UK.

 

Red Flag Alert's algorithm measures corporate distress signals, drawing on
company accounts and factual, legal and financial data from a wide range of
relevant sources, including intelligence from the UK's leading insolvency
business, Begbies Traynor. The algorithm was refreshed in H1 2023 to enhance
the risk factors analysed in the data. The reported results have been
backdated to ensure the consistency of comparative data.

 

Algorithms which drive Red Flag Alert were improved at the end of 2023, with
companies now measured against a new scorecard of indicators to give greater
insight and accuracy into the health of businesses. Two years of work by data
scientists analysing eight years of data, taking into consideration pre,
during and post-pandemic insights to find signals and patterns indicating
businesses in distress, combined with AI tools, means that Red Flag Alert aims
soon to be able to predict how many companies in trouble will go on to fail.

 

The release refers to the number of companies experiencing "Significant" or
"Critical" problems, which are those that have been identified by Red Flag
Alert's proprietary credit risk scoring system which screens companies for a
sustained or marked deterioration in key financial ratios and indicators
including those measuring working capital, contingent liabilities, retained
profits and net worth.

 

Red Flag Alert is commercially available to all businesses, on an annual
subscription basis, to help them better understand risk and exposure and help
subscribers to plan for the future. Further information about Red Flag Alert
can be found at: www.redflagalert.com
(https://protect.checkpoint.com/v2/___http:/www.redflagalert.com/___.bXQtcHJvZC1jcC1ldXcyLTE6bmV4dDE1OmM6bzo4ZTc5ODZlN2FkODQwNmI1YzQ5OTYxZjk5MzM0NDBkMjo2OjJmOGM6ZTY4ZTBlN2IyMzYzZDI0MTVmYzgwMmEyYjhiN2E4MTYwZWI3NTcxNzk2OThkNTgyYWY1NTk4YmUyYzA0ZjhkOTpwOlQ6Tg)

 

Economically active businesses exclude those that are flagged by Companies
House as being, Non-trading, Listed for Strike off / Strike off pending,
Insolvent or Dissolved. Companies where there is insufficient information
available for RFA to assign a health rating are also excluded.

 

About Begbies Traynor Group plc

 

Begbies Traynor Group plc is a leading UK advisory firm with expertise in
business recovery, advisory and corporate finance, valuations, asset sales and
property consultancy.

We have over 900 fee earners operating from 45 locations across the UK,
together with four offshore offices. Our multidisciplinary professional teams
include insolvency practitioners, accountants, lawyers, funding professionals
and chartered surveyors.

·      Business recovery

o  Corporate and personal insolvency; business restructuring and turnaround;
contentious insolvency; creditor services

·      Advisory and corporate finance

o  Debt advisory and finance broking; corporate finance; special situations
M&A; financial advisory

·      Valuations

o  Property, business and asset valuations

·      Asset sales

o  Property, plant and machinery auctions; property and business sales agency

·      Property consultancy

o  Building consultancy; transport planning; commercial property management;
insurance and protection

Further information can be accessed via the group's website at:
https://www.begbies-traynorgroup.com/
(https://protect.checkpoint.com/v2/___https:/www.begbies-traynorgroup.com/___.bXQtcHJvZC1jcC1ldXcyLTE6bmV4dDE1OmM6bzpiZmNiYjMxMGRhNDUzNmZiMzFjODcyNTNlYTczNmY1Zjo2OjZlYzM6MTBmMTIxNzI5YjBhMzA3Njg3YTk3YzNhZDMxZWViM2ZiMTc4YzQ4YTAyMjFjMzQ5OGE2MTI1NWRlNGE2YzQ1NjpwOlQ6Tg)

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