(Alliance News) - Begbies Traynor Group PLC on Friday said its quarterly 'Red Flag Alert' research showed a more than 30% jump in UK companies in 'significant' financial distress, amid weak economic conditions and high interest rates.

Manchester-based Begbies Traynor provides corporate and personal insolvency services, as well as financial advisory and other professional services. Its Red Flag Alert on corporate financial distress in the UK has been running for 20 years.

A total of 554,554 UK companies were in the 'significant' financial distress category in the first quarter, up from 424,041 a year before. The increase was led by construction, food and drug retailers, and general retailers, but all 22 business sectors covered by the report suffered double-digit percentage growth in financial distress over the past year, Begbies Traynor said.

In the more serious 'critical' category of distress, there was a 20% increase from a year before to 40,174 companies, though this figure was down 15% from the fourth quarter of 2023.

"Despite some optimism as we entered the new year, 2024 has so far been characterised by a continuation of the same pressures that plagued companies in the UK throughout 2023," commented Julie Palmer, a partner at Begbies Traynor.

"Since the pandemic, hundreds of thousands of UK businesses depleted their financial reserves and loaded their balance sheets with increasingly unaffordable debt which for many may simply be too great to bear."

Palmer said that as companies pine for a meaningful cut in interest rates, something that may not happen soon enough, larger companies are starting to enter insolvency, a trend that is likely to continue.

Begbies Traynor shares were up 1.4% at 108.50 pence midday Friday in London.

By Tom Waite, Alliance News editor

Comments and questions to newsroom@alliancenews.com

Copyright 2024 Alliance News Ltd. All Rights Reserved.