British Firms Under Strain Hit 738,144, Highest Since 2004

British companies hit by serious financial pressure reached 738,144 in the third quarter of this year, the highest count since BTG began its quarterly red flag report in 2004. The figure is up 1.6% from the same quarter last year. Support services, construction and real estate carried the largest totals, at 118,695, 108,340 and 99,908 businesses respectively.

Hospitality recorded the sharpest movement this year, with bars and restaurants in distress rising 5% to 18,866. Food and drug retailers in trouble climbed more than 7% to 19,269, according to BTG, a major UK insolvency practice that took its current name from Begbies Traynor in February.

The numbers land two days before Chancellor John Healey delivers his first budget on Wednesday. Healey has said he will provide households and businesses with more breathing space. The Middle East war has disrupted the global economy, weighed on public finances and revived pressure on the cost of living, according to the government's framing of the backdrop.

BTG chief executive Mark Fry said British businesses were battling rising employment costs, inflationary pressures, higher energy prices and elevated borrowing costs. He added that these pressures affect not only small businesses' ability to operate but also larger businesses' ability to compete on a global stage.

A BTG freedom of information request showed UK companies still owed HMRC £27.3bn in VAT, corporation tax and PAYE arrears at the end of August. Arrears peaked at £51.3bn during the Covid pandemic against £11.4bn before the pandemic, and about £24bn has since been recovered. Fry said many companies are approaching this budget from a position of financial weakness rather than strength.

Prime Minister Andy Burnham said last week his government would slash red tape for businesses, with plans to make compliance guidance clearer, simplify corporate reporting requirements and extend import tariff suspensions on products favoured by businesses. Healey's budget is scheduled for Wednesday.