RCS - BTG Consulting PLC - Latest Red Flag Alert for Q1 2026

BTG ConsultingAnnouncement

29/04/2026 07:00

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RNS Number : 2725C  BTG Consulting PLC  29 April 2026

'Critical' financial distress leaps by a third in Q1 2026

 

More than 60,000 UK firms now on cliff edge as pressures on businesses mount

 

Highlights:

 

·      In Q1 2026, the number of UK businesses in 'critical' financial
distress increased more than a third (36.9%) year-on-year to 62,193 (Q1 2025:
45,416)

·      All 22 industries monitored by Red Flag Alert experienced a
double-digit percentage increase in 'critical' financial distress versus the
same period last year

·      Consumer facing industries remain under severe pressure with
Hotels and Accommodation (+69.3%), Leisure and Cultural Activities (+65.9%)
and Sports and Health Clubs (+51%) seeing some of the highest annual increases
in 'critical' distress

·      'Significant' financial distress increased 9.6% year-on-year to
634,867 firms (Q1 2025: 579,276)

·      Construction (+10.5%, Q1 2026 - 95,355), Support Services (+7.2%,
Q1 2026 - 92,983) and Real Estate and Property Services (+15.1%, Q1 2026 -
79,118) experienced the highest rate of year-on-year growth for companies in
'significant' financial distress

 

The latest Red Flag Alert
(https://protect.checkpoint.com/v2/r06/___https:/www.redflagalert.com/___.ZXV3MjpuZXh0MTU6YzpvZmZpY2UzNjVfZW1haWxzX2F0dGFjaG1lbnQ6N2NlYWFlNWY1NDY4ZGE2MjdiYzZhOTcxMjVhZTIzMDg6NzoyZjhhOjQxY2UyMDdlYzFjNDhmMWQxZGNjYzM3ZTg2ZjZmZTBhOTE0ZDAzN2VjM2U1MzA3MzM1ZmJkZGI5NTBlM2EyZTk6cDpGOlQ)
 research from BTG
(https://protect.checkpoint.com/v2/r06/___http:/www.btguk.com/___.ZXV3MjpuZXh0MTU6YzpvZmZpY2UzNjVfZW1haWxzX2F0dGFjaG1lbnQ6N2NlYWFlNWY1NDY4ZGE2MjdiYzZhOTcxMjVhZTIzMDg6NzozMzliOmNjMDA2N2YyM2M1OTBmOGFmZDZiZTNkZjUxZWNjZjQyOGZiMzZkYzlkY2ZkMjIyZmFkYmFiM2IzMWQ4MzJiNzE6cDpGOlQ)
for Q1 2026, has revealed the number of businesses in 'critical' financial
distress rose by more than a third (36.9%) compared to the first quarter of
2025, signaling the piling pressure on UK businesses amid major global and
domestic challenges.

 

As of 31 March 2026, BTG's research, which has monitored the financial health
of UK companies for over two decades, found there were 62,193 companies in
'critical' financial distress, substantially higher than the 45,416 in Q1
2025. This was despite a 7.7% fall in critical financial distress compared to
Q4 2025, which is a seasonal trend in the data at the start of the new
calendar year.

 

A slew of increased taxes on businesses across the year, including increases
to employer's National Insurance contribution and national minimum and living
wage hikes form part of the complex picture of challenges driving increased
'critical' distress. Additionally, the UK's historically high tax burden along
with the uncertain economic outlook has impacted consumer confidence,
particularly affecting those sectors reliant on discretionary spending, such
as hospitality. These challenges have been exacerbated by energy and materials
inflation following the outbreak of war in the Middle East towards the end of
the quarter.

 

Together, this meant all 22 of the sectors monitored by Red Flag Alert
experienced an annual increase in the number of companies in 'critical'
financial distress when compared to the same period in 2025.

 

Consumer facing industries, in particular, remain under intense strain as they
navigate subdued consumer confidence and rising input and staff costs. This
resulted in Hotels and Accommodation (+69.3%), Leisure and Cultural Activities
(+65.9%) and Sports and Health Clubs (+51%) delivering some of the highest
annual increases in 'critical' distress at the end of Q1.

 

Businesses in 'significant' financial distress increased 9.6% annually in Q1
2026 to 634,867, with 21 out of 22 sectors experiencing a year-on-year
increase, despite a 12.9% improvement on Q4 2025. The most affected industries
were Construction (+10.5%, Q1 2026 - 95,355), Support Services (+7.2%, Q1 2026
- 92,983) and Real Estate and Property Services (+15.1%, Q1 2026 - 79,118).

 

Julie Palmer, Managing Partner at BTG
(https://protect.checkpoint.com/v2/r06/___http:/www.btguk.com___.ZXV3MjpuZXh0MTU6YzpvZmZpY2UzNjVfZW1haWxzX2F0dGFjaG1lbnQ6N2NlYWFlNWY1NDY4ZGE2MjdiYzZhOTcxMjVhZTIzMDg6NzoyODcwOjFmYTdlZWQ1MDJkZDI4YWQyYjBjYzBhZGJhNzQ4Nzc5OGNmOGVjMWRmYzcxZDZmZDk4YmY3Mzk4MzIwZjQ5MTM6cDpGOlQ)
, said:

 

"Businesses who are reliant on discretionary spending will have been hoping
consumer confidence would make a comeback this year, but I fear they will be
disappointed. Instead, the threat of rising energy bills, inflation, interest
rates and unemployment will see people tightening their belts.

 

"Inevitably we expect to see an increasing number of 'zombie' businesses
tipped over the edge this year. However, we are even starting to see some of
the more successful businesses take a more cautious attitude than you might
expect as they put cash aside to soak up higher costs and weak demand. From
experience, it is the businesses who take action early during such crises and
focus on saving costs, driving up stagnant productivity, trimming their
operations and taking opportunities who stand the best chance of survival.

 

"As always, there will be winners and losers across sectors as geopolitical
events reshape the global economy. One area to watch may be the domestic
Travel and Tourism sector in the UK. With global jet fuel supplies waning and
summer holidays abroad under threat, we could see a staycation boom at home
this year. Should this become a reality in the summer, it could create a
much-needed lifeline for the hospitality, retail, leisure and tourism
businesses across the country.

 

"Unfortunately, no company is immune to such a major energy shock, but some
can find ways to mitigate the impact and emerge strong on the other side.
However, there's always a degree of pain first and for some business leaders,
overcoming the challenges of today may be a bridge too far after years of
challenges since the pandemic."

 

Ric Traynor, Executive Chairman of BTG
(https://protect.checkpoint.com/v2/r06/___http:/www.btguk.com___.ZXV3MjpuZXh0MTU6YzpvZmZpY2UzNjVfZW1haWxzX2F0dGFjaG1lbnQ6N2NlYWFlNWY1NDY4ZGE2MjdiYzZhOTcxMjVhZTIzMDg6NzoyODcwOjFmYTdlZWQ1MDJkZDI4YWQyYjBjYzBhZGJhNzQ4Nzc5OGNmOGVjMWRmYzcxZDZmZDk4YmY3Mzk4MzIwZjQ5MTM6cDpGOlQ)
, said:

 

"The shockwaves from a war in the Middle East will be felt across every corner
of the global economy for some time to come. After initial signs that the UK's
GDP was improving at the very start of the year, it now feels like after
taking a step forward, the UK has taken a few steps backwards following one of
the most severe energy shocks in living memory.

 

"Against this highly volatile backdrop, 'critical' financial distress will
almost certainly deteriorate further as more businesses struggle with higher
energy costs for a sustained period of time. This will have a profound impact
on the UK economy and the Chancellor's goal of delivering a wholesale economic
recovery, alongside sustained growth, looks highly unlikely while we wait for
a resolution to the war.

 

"The coming months will be a critical time for the UK economy. It is clear
that any further inflationary shock or supply chain disruption would be
disastrous for many UK businesses already operating with little margin for
error. The economy cannot function if key segments of the supply chain are
hollowed out. The truth is that we remain a hostage to macro economic shocks
beyond our control, and this combined with one of the most difficult tax and
trading environments in recent times means that the situation could get worse
very quickly for these vulnerable businesses. The Government must focus on the
endemic challenges of improving productivity and attracting the high-quality
investment necessary to kickstart growth if the UK is to regain meaningful
momentum."

 

For more information, visit www.btguk.com
(https://protect.checkpoint.com/v2/r06/___https:/www.btguk.com/___.ZXV3MjpuZXh0MTU6YzpvZmZpY2UzNjVfZW1haWxzX2F0dGFjaG1lbnQ6N2NlYWFlNWY1NDY4ZGE2MjdiYzZhOTcxMjVhZTIzMDg6NzphYWI3OmRiMWUxYjY2M2ZkODYwNDMwYzllMGEyZWIxZTViYTEwZmQzZTEwMTA4ZGUxMDkxZDNmMjU2ODMxNGFhOWRmM2Q6cDpGOlQ)

 

ENDS

2026 Q1 snapshot:

 

 'Significant' distress by sector                 Number of businesses  'Critical' distress by sector                    Number of businesses
 Construction                                     95,355                Construction                                     9,466
 Support Services                                 92,983                Support Services                                 8,575
 Real Estate & Property Services                  79,118                Real Estate & Property Services                  7,719
 Professional Services                            53,115                Professional Services                            4,582
 General Retailers                                43,386                General Retailers                                4,448
 Health & Education                               42,704                Health & Education                               4,126
 Telecommunications & Information Technology      40,044                Telecommunications & Information Technology      3,426
 Media                                            26,369                Media                                            2,576
 Leisure & Cultural Activities                    18,100                Bars & Restaurants                               2,261
 Food & Drug Retailers                            17,696                Food & Drug Retailers                            2,084
 'Significant' distress by region                 Number of businesses  'Critical' distress by region                    Number of businesses
 London                                           178059                London                                           17247
 South East                                       108555                South East                                       10692
 Midlands                                         78029                 Midlands                                         7522
 North West                                       65721                 North West                                       6380
 South West                                       45708                 South West                                       4565
 Yorkshire                                        44209                 Yorkshire                                        4352
 East of England                                  41848                 East of England                                  3971
 Scotland                                         32282                 Scotland                                         3313
 Wales                                            17566                 Wales                                            1847
 North East                                       12019                 North East                                       1245
 Northern Ireland                                 10814                 Northern Ireland                                 1051

 

Press office contacts:

 Ian Stanley                                            Gideon Casey

 National Head of PR                                    External Communications Manager

 07483 913033                                           07484 997436

 Ian.Stanley@btguk.com (mailto:Ian.Stanley@btguk.com)   Gideon.Casey@btguk.com (mailto:Gideon.Casey@btguk.com)

 

About BTG

BTG is a leading financial and real estate advisory firm. We use our expertise
to enhance, protect and realise the value of our clients' businesses, assets
and investments. Turning complexity into clarity and delivering optimal
outcomes; we support our clients in funding and delivering their projects and
realising value. At BTG, we don't just advise we act, putting our expertise
into action.

 

Formerly Begbies Traynor Group plc, the leading advisory group rebranded to
BTG Consulting plc in February 2026, unifying its financial and real estate
advice and expertise under eight service lines across three core brands, BTG,
BTG Begbies Traynor and BTG Eddisons. More information on the rebrand can be
found here
(https://protect.checkpoint.com/v2/r06/___https:/www.btguk.com/sjBxdgjlgnjx-ywfDstw-lwtzu-uqh-wjgwfsix-yt-gyl-fx-ny-jDjx-kzwymjw-lwtBym___.ZXV3MjpuZXh0MTU6YzpvZmZpY2UzNjVfZW1haWxzX2F0dGFjaG1lbnQ6N2NlYWFlNWY1NDY4ZGE2MjdiYzZhOTcxMjVhZTIzMDg6NzpiZjc0OjcyNzMwMmVjZmUwMjVlOTQzZmU2ZjRkZjc2MDc1YTZlNWJkODUyMTAzOWI5YmIxM2IyNDI1OTFlNDJjN2Q5ZDk6cDpGOlQ)
.

 

www.btguk.com
(https://protect.checkpoint.com/v2/r06/___https:/www.btguk.com/___.ZXV3MjpuZXh0MTU6YzpvZmZpY2UzNjVfZW1haWxzX2F0dGFjaG1lbnQ6N2NlYWFlNWY1NDY4ZGE2MjdiYzZhOTcxMjVhZTIzMDg6NzphYWI3OmRiMWUxYjY2M2ZkODYwNDMwYzllMGEyZWIxZTViYTEwZmQzZTEwMTA4ZGUxMDkxZDNmMjU2ODMxNGFhOWRmM2Q6cDpGOlQ)

 

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, BTG 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/___.ZXV3MjpuZXh0MTU6YzpvZmZpY2UzNjVfZW1haWxzX2F0dGFjaG1lbnQ6N2NlYWFlNWY1NDY4ZGE2MjdiYzZhOTcxMjVhZTIzMDg6NzowN2I0OjdiZTgyYjMwOTJiNjhjNTg2YjFlNTRkMDRjY2Q4ZjFmNmY4ZmYyZWY4NjFmNDU5OTczNGQ1YTk3MWQ2YjdlNDI6cDpGOlQ)
 

 

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.

 

 

 

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