RCS - Begbies Traynor Grp - Latest Red Flag Alert Report for Q2 2025

Begbies TraynorAnnouncement

Mon 07:00

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RNS Number : 7324S  Begbies Traynor Group PLC  28 July 2025

Monday, 28 July 2025

 

Critical financial distress increases across the economy

 

Nearly 50,000 businesses in critical financial distress amid climate of
volatile consumer spending, global economic turbulence and tax rises

 

Highlights:

 

·      In Q2 2025, 'critical' financial distress leapt 21.4%
year-on-year to 49,309 businesses (Q2 2024: 40,613); an 8.6% increase versus
Q1 2025 (45,416)

·      Of the 22 sectors covered by Red Flag Alert, all experienced an
increase in 'critical' financial distress versus Q2 2024, as economic
pressures impacted every corner of the economy

·      Over the last 12 months, consumer-facing industries continued to
experience some of the most extreme rises in 'critical' financial distress -
Bars & Restaurants (+41.7%), Travel & Tourism (+39.0%) and General
Retailers (+17.8%)

·      'Significant' financial distress also rose 10.8% year-on-year to
666,876 businesses (Q2 2024: 601,950), a 15.2% increase versus Q1 2025
(579,276)

·      Only six out of 22 industries saw a year-on-year reduction in
'significant' distress, including Printing and Packaging (23.5%),
Manufacturing (11.6%) and Industrial Transportation and Logistics (10.1%)

 

The latest "Red Flag Alert" report from Begbies Traynor, which has provided a
snapshot of British corporate health for almost two decades, reveals how
nearly 50,000 businesses are now in 'critical' financial distress amid the
current climate of volatile consumer spending, global economic turbulence and
rising taxes on business.

 

As of 30 June 2025, 49,309 businesses were in 'critical' financial distress, a
21.4% increase on Q2 2024 and an 8.6% increase on Q1 2025. The rise in
'critical' financial distress was felt in every corner of the UK economy with
all 22 sectors covered by Red Flag Alert experiencing an increase over the
last 12 months.

 

The latest research shows that the challenges currently being navigated by
businesses are triggering concerning increases in 'critical' financial
distress in consumer-facing sectors, including Bars & Restaurants
(+41.7%), Travel & Tourism (+39.0%) and General Retailers (+17.8%).

 

After some signs of improvement in Q1, this latest research also shows a
noticeable decline in the health of the UK economy in the second quarter of
2025. Some of the economy's key bellwether sectors worryingly saw critical
distress rise at pace  versus Q2 2024, including the Support Services
(+31.3%) and Construction (+15.8%) sectors..

 

After a challenging second quarter, 'significant' financial distress rose by
10.8% year-on-year to 666,876 businesses (Q2 2024: 601,950), which represents
a 15.2% increase versus Q1 2025 (579,276). In contrast to the wider picture,
there were some positives, and six of the 22 sectors experienced a
year-on-year fall in 'significant' distress, including Printing and Packaging
(23.5%), Manufacturing (11.6%) and Industrial Transportation and Logistics
(10.1%).

 

Julie Palmer, Partner at Begbies Traynor, said:

"Financial distress has intensified over the past twelve months in every
corner of the economy. This means businesses across the UK are facing
significant headwinds and many will have to review where they can tighten
their budgets or restructure to give themselves more stability in the
immediate future.

 

"This time last year, there was a degree of optimism amongst business leaders
who were hoping to see a shift in fortunes in the second half of the year, but
fast-forward 12 months and confidence is in short supply.

 

"Households are still grappling with their finances, and this is keeping
consumer confidence volatile. The knock-on effect of this is clear to see in
the consumer-facing sectors where margins are thin, growth is hard to come by,
and the impact of higher employee costs is pushing many businesses to the
brink of collapse.

 

"So, it is of no surprise to me that while larger pub groups might be
performing well, by squeezing out extra efficiencies to counteract onerous
price rises, many independent players won't have the scale to withstand the
pressures of this environment for another 12 months if nothing improves.

 

"In the face of these headwinds, a large proportion of the 50,000 businesses
currently in 'critical' financial distress need to urgently investigate their
options if they are going to weather the storm. With no end in sight to the
current economic malaise, I fear the financial burdens companies are enduring
at present are simply too high for many not to avoid collapse."

 

Ric Traynor, Executive Chairman of Begbies Traynor, said:

"The sharp rise in critical distress underscores just how tough the economic
environment is for UK businesses and it's abundantly clear that tens of
thousands of firms are struggling to stay afloat.

 

"Small and medium sized businesses across the UK are being put under immense
strain by the recent increases to employer's NI as well as the increase to the
national minimum wage. With limited financial headroom to absorb rising costs,
many businesses are now reaching a tipping point.

 

"The result of this is reflected in the latest figures from Red Flag Alert.
Critical financial distress is rising across every sector and trading
conditions remain very difficult. Alongside this, policy decisions continue to
add pressure, so there is a very real risk that more of these critically
distressed businesses will move towards formal insolvency over the next 12
months.

 

"As we enter the second half of the year, the wider economy continues to show
signs of strain. GDP fell in May after positive growth at the start of the
year, inflation remains stubborn and unemployment has risen to a four year
high. Taken together with geopolitical uncertainty, tariffs, dampening
business confidence and continued financial pressures, UK businesses have many
difficult decisions to make in the coming months."

 

-- ENDS --

 

 Most significantly Distressed Industries         Number of businesses in significant distress  Most critically distressed industries            Number of businesses in critical distress
 Support Services                                 102,380                                       Support Services                                 7,560
 Construction                                     102,285                                       Real Estate & Property Services                  7,154
 Real Estate & Property Services                  81,516                                        Construction                                     6,999
 Professional Services                            60,427                                        General Retailers                                3,666
 General Retailers                                44,631                                        Professional Services                            3,416
 Health & Education                               44,253                                        Telecommunications & Information Technology      2,776
 Telecommunications & Information Technology      44,019                                        Health & Education                               2,722
 Media                                            27,617                                        Bars & Restaurants                               2,249
 Food & Drug Retailers                            18,229                                        Food & Drug Retailers                            1,985
 Financial Services                               18,051                                        Media                                            1,764
 Significant distress by region                                                                 Critical distress by region
 London                                           197,975                                       London                                           17,194
 South East                                       113,494                                       South East                                       7,022
 Midlands                                         80,847                                        Midlands                                         5,729
 North West                                       69,565                                        North West                                       5,270
 South West                                       46,384                                        Yorkshire                                        3,426
 Yorkshire                                        45,842                                        South West                                       2,686
 East of England                                  42,091                                        East of England                                  2,576
 Scotland                                         31,251                                        Scotland                                         2,347
 Wales                                            17,203                                        Wales                                            1,330
 North East                                       11,711                                        North East                                       885
 Northern Ireland                                 10,459                                        Northern Ireland                                 841
 Misc                                             54                                            Misc                                             3

 

For further information, contact:

 

 MHP Communications:  07557 741 217

 Katie Hunt           07770 753 544

 Charles Hirst        BegbiesCorporate@mhpgroup.com (mailto:BegbiesCorporate@mhpgroup.com)

 Hugo Harris

 

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/r06/___http:/www.redflagalert.com/___.ZXV3MjpuZXh0MTU6YzpvOjk3NWJmMWNlM2Y2OTNjOTAwMTBmMzA4NjAxMTJiZWQxOjc6ODEzZjpmZDAzNjJlOTdhMjFhZmRkMWYwNzNlNTcyMDQ0NWQzYmQwYmZkMWU3YjU4NjU2MGJmNDZkN2EwYjdjZWMzODFkOnA6RjpU)

 

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/r06/___https:/www.begbies-traynorgroup.com/___.ZXV3MjpuZXh0MTU6YzpvOjk3NWJmMWNlM2Y2OTNjOTAwMTBmMzA4NjAxMTJiZWQxOjc6NTlmYTpiNWFjYTYxZmFlYjBlOTg4NjBmNzFkYWM1ODZmNDkzYTE5N2FkZDczOGQ1MDdkNzcwMjQ3MzIxOGQzNWU0YTI3OnA6RjpU)

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