Almost 500,000 UK businesses are facing financial distress

Business News Business Update News

According to a new study, almost half a million businesses in the UK are experiencing significant financial distress.

Businesses in the property, leisure and tourism sectors are experiencing the most severe issues, according to the Red Flag Alert.

The Alert has also found that 484,000 businesses are in significant distress, which is equivalent to around 14 per cent of all active UK businesses.

This is unsurprising considering that average insolvent company debt has increased by 122 per cent since 2015 to £66,000.

Amongst those worst affected were businesses linked to the consumer economy who were being affected by falling sales, according to the report.

In particular, the Alert highlighted higher levels of distress in the following sectors: hotels and accommodation, sport and health clubs and leisure and cultural activities.

The downturn in these industries has indirectly affected those reliant on the health of the consumer economy, such as real estate and property companies, who were most affected by the weakest consumer spending since records began in the mid-1990s.

According to the report, this sector saw a 15 per cent year-on-year increase in the number of companies in significant financial distress, rising to 49,342 in the second quarter of 2019.

There was also an increased level of significant distress within the financial services sector, with some 12,666 businesses now facing significant distress, an increase of 5 per cent compared to the second quarter of last year. Brexit is thought to have had a significant effect in this sector.