Begbies Traynor Group PLC on Monday said its ’red flag alert’ research showed an 8.5% increase in UK firms in ’significant’ financial distress in the second quarter from the first.

Begbies Trayner is a Manchester, England-based consultancy that provides recovery, financial advisory and property services.

It quarterly red flag alert tracks the number of UK companies experiencing significant or critical financial problems. The research is based upon a proprietary credit risk scoring system that screens companies for a sustained or marked deterioration in key financial ratios and indicators.

A total of 601,950 UK companies were in the ’significant’ distress category in the second quarter, up from 439,815 a year before. The increase was led by the travel & tourism, hotels & accommodation, health & education, and bars & restaurants.

Julie Palmer, partner at Begbies Traynor, attributed the pressure on ‘consumer-facing sectors’ to ‘higher costs pushed up by higher wages’ and ‘one of the wettest summers on record’.

In the more serious ’critical’ category of distress, there was a 1.1% increase in the recent three months, compared to the first quarter of the year. The increase was led by the construction, real estate, and support services sectors, which represent over 40% of the companies in critical financial distress.

London was the most affected region with 12,560 firms in ’critical’ distress and 169,442 in ’significant’ distress.

Executive Chair Ric Traynor commented: ‘The prevailing economic situation means that we still expect to see heightened levels of company insolvencies extend into 2025 and beyond.’

Begbies Traynor shares were unchanged at 104.00 pence in London on Monday.

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