50,000 UK Businesses Are On The Verge Of Collapse, Report
50,000 UK Businesses Are On The Verge Of Collapse
On Monday, Begbies Traynor Group released a report revealing a staggering over a quarter increase in the number of UK businesses on the verge of bankruptcy. Experts attribute this surge in financial distress to a series of interest rate hikes, creating what they term a ‘debt storm.
In the final quarter of last year, a total of 47,477 firms in Britain were classified as being in “critical” financial distress, a significant rise of 26% compared to the previous three months. This marks the second consecutive quarter in which critical financial distress has increased by 25%.
A substantial portion of these struggling businesses is anticipated to face insolvency within the next year. Julie Palmer, a partner at Begbies Traynor, attributes this dire situation to soaring interest rates, rampant inflation, and weak consumer confidence, all compounded by rising and unpredictable input costs. The Bank of England has been gradually raising interest rates, starting from 0.1% at the end of 2021 and currently standing at 5.25%, in an attempt to curb inflation.
Businesses in the UK
Palmer emphasized that a large number of businesses in the UK, which had taken on affordable debt in the past, are now grappling with the additional financial burden. He further stated that the upcoming year will be a challenging battle for survival for tens of thousands of British businesses, despite the hope for a brighter future.
Palmer highlights that macroeconomic instability is affecting all sectors of the UK economy, with the construction and real estate industries facing the most severe concerns. Begbies reports that nearly 30% of businesses in these sectors are experiencing critical financial distress. The researchers note an increase in critical financial distress across all 22 analyzed sectors in the previous year.
Moreover, the final quarter of the previous year saw a 12.9% increase in significantly distressed British companies, totaling approximately 540,000, according to the report. Begbies Traynor warns of an expected acceleration in insolvency rates in the UK in 2024.
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