Begbies Traynor warns that impending tax rises will increase strain on firms

Construction is the sector with the most firms deemed to be in either critical or significant financial distress, a new report has said.

The latest Red Flag Alert report from Begbies Traynor said the number of UK businesses in critical financial distress rose by 50.2% quarter-on-quarter to 46,853 in Q4 last year

It said there were nearly 7,000 construction firms in critical financial distress at the end of last year – a rise of 58% – while the number of construction firms facing significant financial distress was more than 97,000.

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Begbies Traynor said nearly 7,000 construction businesses were in critical financial distress at the end of last year

Other sectors facing similar warnings were support services, real estate and property.

Of the 22 sectors covered by Red Flag Alert, 21 saw a noticeable increase quarter-on-quarter in the number of businesses in ‘critical’ financial distress.

Other sectors which saw a rise in this category were hotels and accommodation (+83.63%) and leisure and cultural activities (+76.46%).

Julie Palmer, partner at Begbies Traynor, said: “The situation feels very precarious. Sadly, this has only been exacerbated by the tax rises and increase in national minimum wage levied on businesses during the October Budget which means the financial strain on businesses will only increase later this year.

“Even at this very early stage, the outlook for the rest of 2025 is uncertain, at best.”