There was an “unprecedented” increase in the number of companies on the verge of insolvency, according to a closely monitored report.
The latest RED Flag Alert report by Begbies Traynor, an insolvency specialist, has shown that the number of people in critical financial difficulty increased by 50 % in the three months preceding December compared to June-August.
He indicated that 46,583 companies clung, companies in contact with consumers, such as companies in the hotel sector, being the most affected by deterioration.
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He added that there was a “notable” increase in financial tensions in 21 of the 22 sectors of the economy covered by the study.
The report highlights the pressures on numerous fronts linked to the increase in energy costs, to budget tax measures, high interest rates and low demand from consumers.
The report has been published as a key measure of the latter, published once a month by the GFK market research company, and shows that consumer confidence has been at its lowest level since December 2023.
The five components of the survey, including the prospects for personal finances and the economy, have decreased.
The conclusions of the two reports agree with a series of pessimistic economic signals since the Labor electoral victory, with stagnation settling on a quarterly basis.
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Chancellor Rachel Reeves warned at the end of July against a difficult budget to come to plug a “black hole” of 22 billion pounds sterling in public finances that a treasure study would have revealed.
The budget should increase corporate taxes by 25 billion pounds sterling from April to help increase the financing of investments and public services, but companies claim that the financial shock will simply result in a drop in investments, a Price increase and job losses at all levels.
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The last proof of the difficulty of the economy appeared in the data published later on Friday, which highlighted timid growth when the activity of manufacturing companies and services was combined.
Preliminary reading of the composite index of S&P purchase directors also highlighted a second month of job cuts which, according to respondents, were directly linked to future tax increases. A price increase has also been reported.
Julie Palmer, partner at Begbies Traynor, said about the conclusions of her report: “In almost all sectors, there has been an unprecedented level of growth in the number of companies that run a serious risk of insolvency Over the next 12 months.
“The fact that distress is felt in almost all sectors of the economy highlights how difficult the prospects are for British companies.
“After a disappointing Christmas, the sectors in direct contact with consumers, in particular, feel pressure, with rising operating costs and higher wages which are added to an already difficult situation.
“While many companies of this type already work with low margins, I fear that the current situation pushes some to the end.
“Indeed, at a time when consumer confidence is so volatile and where borrowing costs seem likely to be structurally higher in the near future, the situation seems very precarious.
“Unfortunately, this situation was only exacerbated by tax increases and the increase in the national minimum wage imposed on companies during the British budget of October 2024, which means that the financial pressure on companies will not that increase later this year. »»
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The government has always defended the budget, saying that it would set the foundations for the country that the country so much needs.
Economists provide that public investments will contribute to a resumption of production in the second half.
However, many warn that the business response to the budget will also be crucial.