Tens of thousands of companies in the West Country are in “significant” financial distress, a new report has revealed. The latest Begbies Traynor Red Flag Alert research, which provides a snapshot of British corporate health, found 42,111 businesses in the region in difficulty in the second quarter of the year.
The figures were driven by the travel and tourism sector, hotels and accommodation, and bars and restaurants. According to the report, the financial difficulties facing these industries reflects a lack of consumer confidence in the UK, which is putting pressure on companies within these sectors.
More than 2,500 firms in the region also moved into the “critical” financial distress category, meaning they are expected to enter insolvency over the next 12 months. The state of the construction, real estate, hospitality, and financial and support services sectors was highlighted as a particular concern.
Julie Palmer, partner at Begbies Traynor, said: “It looks like 2024 will prove to be another tough year for UK businesses. Six months in, and we’re seeing clear signs that financial distress is growing across almost every sector.
“It is a particularly difficult situation for businesses in consumer facing sectors, such as hospitality. While a fall in inflation to more palatable levels will likely provide some relief, consumers simply aren’t behaving like they used to and these businesses, who are still grappling with higher costs pushed up by higher wages, are really struggling. This, combined with one of the wettest summers on record, continues to significantly impact trading.”
Nationally, the number of companies in significant financial distress jumped by nearly 10% in the second quarter to 601,950 businesses, Begbies Traynor said. During the period, UK firms in ‘critical’ financial distress increased by 1.1% to 40,613.
Ric Traynor, executive chairman of Begbies Traynor, added: “We are a little over halfway through the year and the macro-economic environment for UK companies remains extremely testing. There might be a greater sense of optimism in certain corners of the economy, but this is yet to translate into anything meaningful for the hundreds of thousands of businesses fighting for survival.”