UK businesses in financial distress hit two-decade high before budget
A record 738,144 UK businesses were in significant financial distress in the third quarter, up 1.6% year on year - the highest since the report began in 2004, according to administrator BTG.
UK businesses in financial distress hit two-decade high before budget
Sectors under most strain
The quarterly count by BTG, which changed its name from Begbies Traynor in February, put 738,144 companies in significant distress, the worst reading since its red flag report launched in 2004. Support services carried the heaviest load:
- Support services: 118,695 businesses in significant distress
- Construction: 108,340
- Real estate: 99,908
Some sectors deteriorated fastest over the year. Bars and restaurants in distress rose 5% to 18,866, while food and drug retailers climbed by more than 7% to 19,269.
Mounting tax arrears
A freedom of information request by BTG found businesses owed £27.3bn to HMRC in VAT, corporation tax and PAYE at the end of August. That compares with a pre-pandemic total of £11.4bn. About £24bn has been recovered since arrears peaked at £51.3bn during the Covid pandemic.
Pressures businesses face
Mark Fry, BTG's chief executive, said companies are battling a combination of rising employment costs, inflationary pressures, higher energy prices and elevated borrowing costs.
"battling a combination of rising employment costs, inflationary pressures, higher energy prices and elevated borrowing costs"
Fry said these pressures affect not only small businesses' ability to operate but also larger businesses' ability to compete, and that many companies are approaching this budget from a position of financial weakness rather than strength. The backdrop includes disruption to the global economy from the war in the Middle East, pressure on public finances and a reignited cost of living crisis.
What the budget may bring
Chancellor John Healey delivers his first budget on Wednesday, which he has vowed to use to give households and businesses more "breathing space". Last week, Prime Minister Andy Burnham promised his government would "slash red tape" for businesses, with plans to make compliance guidance clearer, simplify the UK's corporate reporting requirements and extend import tariff suspensions.
Fry said structural hurdles, the weight of red tape, employment legislation and the tax burden, alongside high interest and energy costs, will need to be tackled for a budget for business.
