LONDON – The number of UK businesses in critical financial distress increased 36.9% year-on-year to 62,193 in the first quarter of 2026, according to research from BTG Consulting PLC.
The figure represents a substantial rise from 45,416 companies in the same period last year, though it declined 7.7% from the fourth quarter of 2025, which BTG attributed to seasonal trends at the start of the calendar year.
All 22 industries monitored by Red Flag Alert experienced double-digit percentage increases in critical financial distress compared to the first quarter of 2025, according to the press release statement. Consumer-facing sectors showed particularly sharp increases, with Hotels and Accommodation rising 69.3%, Leisure and Cultural Activities up 65.9%, and Sports and Health Clubs increasing 51%.
BTG cited increased employer National Insurance contributions, national minimum and living wage increases, and the UK’s high tax burden as factors affecting businesses. The company also referenced energy and materials inflation following conflict in the Middle East toward the end of the quarter.
Companies in significant financial distress rose 9.6% annually to 634,867 in the first quarter, with 21 of 22 sectors experiencing year-on-year increases. Construction recorded 95,355 companies in significant distress, Support Services had 92,983, and Real Estate and Property Services totaled 79,118.
By region, London had the highest number of critically distressed businesses at 17,247, followed by the South East with 10,692 and the Midlands with 7,522.
Red Flag Alert has monitored UK corporate financial health since 2004, using algorithms that analyze company accounts and financial data. The system was updated in 2023 to enhance risk factor analysis.
BTG Consulting PLC, formerly Begbies Traynor Group plc, rebranded in February 2026.
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Source:
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