RCS - Begbies Traynor Grp - Latest Red Flag Alert Report for Q3 2025

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RNS Number : 3900F  Begbies Traynor Group PLC  30 October 2025

Thursday, 30 October 2025

 

Critical Financial Distress Soars Across the Economy Ahead of Budget

 

UK businesses look for economic certainty in November's Budget following a 78%
increase in 'Critical' financial distress over the last 12 months

 

Highlights:

·      The number of businesses in 'critical' financial distress surged
78.0% year-on-year, with 55,530 companies affected in Q3 2025 (Q3 2024:
31,201)

·      This was also a 12.6% increase in the number of businesses in
'critical' financial distress versus the prior quarter (Q2 2025: 49,309)

·      Of the 22 sectors covered by Red Flag Alert, 21 experienced a
rise in 'critical' financial distress of more than 40% versus the same period
last year

·      Consumer-facing industries continue to be under the most severe
pressure, with Leisure & Cultural Activities (+96.7%), Hotels &
Accommodation (+92.5%) and General Retailers (+85.6%) experiencing some of the
most extreme increases in 'critical' financial distress

·      'Significant' financial distress also increased 14.8%
year-on-year to 726,594 firms (Q3 2024: 632,756), following a 9.0% rise from
666,876 in Q2 2025

·      Of the 18 of 22 sectors experiencing an annual increase in
'significant' distress, Utilities (+35.8%), Real Estate & Property
Services (+31.8%) and Financial Services (+22.2%) witnessed the highest growth

 

The latest Red Flag Alert
(https://protect.checkpoint.com/v2/r06/___https:/www.redflagalert.com/___.ZXV3MjpuZXh0MTU6YzpvOjkxNmMwNzUzYTY1MjU1ZWNmNWFlMTRmOTBhMjU2YzI5Ojc6MDE0MTplMGNhYzVkNWEyMTVmOWEyNzEwZTk0NjgxZDdiZWJiOTMxNTBjNDJkNzRhNWU0ZThhNWVmMzdiMTIyM2RhNWE2OnA6RjpU)
report from Begbies Traynor
(https://protect.checkpoint.com/v2/r06/___https:/www.begbies-traynorgroup.com___.ZXV3MjpuZXh0MTU6YzpvOjkxNmMwNzUzYTY1MjU1ZWNmNWFlMTRmOTBhMjU2YzI5Ojc6YWUxYzowNmQ3M2UwZGUyMzgwYWFkNmNkYmZhZmIwOTQ2NDc5N2IwMDJlYjNhMDQzZDhiZGY5ZmY3MjYxNjkzN2MzZDhlOnA6RjpU)
, which has provided a snapshot of British corporate health for almost two
decades, has revealed a 78.0% year-on-year increase in 'critical' financial
distress as higher taxes on businesses, economic uncertainty and inflation
weighed on the UK economy.

 

As of 30 September 2025, 55,530 companies were in 'critical' financial
distress, a 12.6% rise on the previous quarter (Q2 2025: 49,309). Notably,
this rise in 'critical' distress was widespread, with 21 of the 22 sectors
monitored by Red Flag Alert reporting a considerable deterioration in their
financial health compared with the same period last year.

 

The data paints a particularly difficult picture for consumer-facing
industries, which continue to bear the brunt of the ongoing economic
uncertainty. Leisure & Cultural Activities (+96.7%), Hotels &
Accommodation (+92.5%), and General Retailers (+85.6%) saw some of the
steepest increases in 'critical' distress over the last 12 months, reflecting
subdued discretionary spending and the impact of sustained cost pressures.

 

Meanwhile, the number of businesses in 'significant' financial distress also
continued to climb in 18 out of 22 sectors analysed, rising 14.8% year-on-year
to 726,594 firms (Q3 2024: 632,756), following a 9.0% increase from 666,876 in
Q2 2025. The picture in Hotels & Accommodation (+24.3%), Travel &
Tourism (+14.2%), and Food & Beverages (+12.9%) is of particular concern.

 

Julie Palmer, Partner at Begbies Traynor, said:

"The steep increase in businesses in 'critical' financial distress shows the
UK economy is in real trouble. 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.

 

"The Government must get the Budget in November right, but the Chancellor
faces a delicate balancing act between delivering 'business friendly' measures
while balancing the books. There has been a lot of temperature testing in the
run up to November, but it is critical that the final measures are decisively
pro-business.

 

"We are entering a critical phase. Consumer-facing sectors like retail,
hospitality and leisure are already in deep distress and have little capacity
to absorb further shocks or pressures on consumers, while many other
industries are also treading water. Without meaningful support, we can expect
more restructuring, rising insolvencies and a continued loss of economic
confidence well into 2026."

 

Ric Traynor, Executive Chairman of Begbies Traynor, said:

"The sharp rise in critical financial distress in nearly every sector is
particularly concerning. Over the last 12 months, we have seen a noticeable
surge in the number of companies in serious financial trouble and there
appears to be little light at the end of the tunnel.

 

"Many UK businesses are having to deal with a number of intense pressures,
including rising geo-political uncertainty, tariffs, and the deteriorating
economic situation in the UK, which is suffering from stubbornly high
inflation, high taxation and high borrowing costs. With confidence and
investment both subdued, the challenges for businesses remain substantial.

 

"Rising insolvencies, weak productivity and growing unemployment all point to
a wider slowdown that is now becoming evident in almost every sector. With
public finances stretched and Government borrowing running above forecast, the
Chancellor faces very difficult decisions ahead of the Autumn Budget.

 

"Any measures that shift more of the burden onto businesses will only deepen
the uncertainty facing them as they look ahead to 2026. Additionally, with
consumer confidence so volatile, anything that increases the tax burden on
individuals is likely to have a disastrous effect on consumer-facing
industries like hospitality.

 

"Reducing inflation is proving to be challenging and it remains high enough to
limit any meaningful reduction in interest rates in the near term. As a
result, businesses are contending with sustained financial pressures from all
sides and margins continue to be eroded. Many have already delayed investment
or reduced headcount to preserve capital and it does not look like we will see
small and medium businesses start to invest for growth again for some time.

 

"Many UK businesses will be desperate for some respite; however, I fear that
without tangible policy support to ease the pressures they currently face, we
are likely to see corporate distress and insolvencies continue to rise next
year."

 

-- ENDS --

 

 Most significantly Distressed Industries         Number of businesses in significant distress  Most critically distressed industries            Number of businesses in critical distress
 Support Services                                 115,314                                       Support Services                                 8,801
 Construction                                     103,551                                       Real Estate & Property Services                  8,018
 Real Estate & Property Services                  91,088                                        Construction                                     7,361
 Professional Services                            62,930                                        Professional Services                            4,122
 Telecommunications & Information Technology      47,744                                        General Retailers                                4,106
 General Retailers                                47,676                                        Telecommunications & Information Technology      3,146
 Health & Education                               45,946                                        Health & Education                               2,997
 Media                                            30,953                                        Media                                            2,360
 Financial Services                               22,815                                        Bars & Restaurants                               2,056
 Leisure & Cultural Activities                    19,963                                        Food & Drug Retailers                            1,877
 Significant distress by region                                                                 Critical distress by region
 London                                           221,095                                       London                                           19,323
 South East                                       122,548                                       South East                                       8,104
 Midlands                                         86,075                                        Midlands                                         6,406
 North West                                       74,079                                        North West                                       5,675
 South West                                       50,902                                        Yorkshire                                        3,589
 Yorkshire                                        48,674                                        South West                                       3,347
 East of England                                  45,503                                        East of England                                  2,948
 Scotland                                         34,290                                        Scotland                                         2,745
 Wales                                            18,522                                        Wales                                            1,445
 North East                                       12,677                                        North East                                       1,008
 Northern Ireland                                 12,137                                        Northern Ireland                                 933
 Misc                                             92                                            Misc                                             8

 

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/___.ZXV3MjpuZXh0MTU6YzpvOjkxNmMwNzUzYTY1MjU1ZWNmNWFlMTRmOTBhMjU2YzI5Ojc6NzUxMzoxYWZmZDQzYWIzMTViMDQwODgxMTFjZmQ1NWQ0NWQyNjEwOWRiMzZlNDMyNjQ5NDJiYzBhNmJlNmNjMDJkODc4OnA6RjpU)

 

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/___.ZXV3MjpuZXh0MTU6YzpvOjkxNmMwNzUzYTY1MjU1ZWNmNWFlMTRmOTBhMjU2YzI5Ojc6ZTYzMzozZGFiYzhkZTJlNjlmNWE0NzA5NGZmYjUwOTljYTg3MmEzYmQ1MWIwOTZiMWIyZDk3Y2ZiYzFhNzBjMTZiNTEwOnA6RjpU)

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