The number of businesses in significant financial distress has risen 81 percent since 2016, according to figures from Begbies Traynor.
The firm’s Red Flag Alert research found the number of businesses in facing major financial difficulties now stands at 494,000, with distress highest amongst recently formed companies – those registered since 2014.
There is a danger that, given the failure rate among recently-formed companies, the overall number of businesses in distress could exceed 500,000 in 2020.
The real estate and property sector, often considered a bellwether of the UK economy, has been particularly badly affected with a 13 percent increase in the number of businesses in significant financial distress between Q4 2018 and Q4 2019.
In retail, meanwhile, there has been a two percent increase in the number of retailers in significant distress since Q4 2018 to 31,615. That malaise has also hit online retailers, with an eight percent year-on-year increase in the number of these retailers facing significant financial distress.
That trend has shown signs of continuing in 2020, with the collapse of department store Beales in January.
Julie Palmer, partner at Begbies Traynor, said: “Businesses and the UK economy as a whole will want to avoid a repeat performance of 2019, where distress increased to record levels on the back of ongoing uncertainty around Brexit. These figures clearly demonstrate the impact of this indecision, and with political certainty and a clear Brexit path, UK businesses should, at last, be able to plan for 2020 with a greater sense of clarity.
“However, the macro economic climate is complicated and we are seeing clear winners and losers, as evidenced by this latest Red Flag data. Currently, we do not know if the failing performance within some sectors is due to short term confidence issues, or more fundamental economic and structural issues.”