50,000 companies on brink of collapse

The latest “Red Flag Alert” report from Begbies Traynor reveals how nearly 50,000 businesses are now in ‘critical’ financial distress amid the current climate of rising taxes on business, volatile consumer spending and global economic turbulence.

As of 30 June 2025, 49,309 businesses were in ‘critical’ financial distress, a 21.4% increase on Q2 2024 and an 8.6% increase on Q1 2025. The rise in ‘critical’ financial distress was felt across the UK economy with all 22 sectors covered by Red Flag Alert experiencing an increase over the last 12 months.

The latest research shows that the challenges currently being faced by businesses are triggering concerning increases in ‘critical’ financial distress in consumer-facing sectors, including Bars & Restaurants (+41.7%), Travel & Tourism (+39.0%) and General Retailers (+17.8%).

After some signs of improvement in Q1, this latest research also shows a decline in the health of the UK economy in the second quarter of 2025. Some of the economy’s key bellwether sectors worryingly saw critical distress rise at pace versus Q2 2024, including the Support Services (+31.3%) and Construction (+15.8%) sectors.

After a challenging second quarter, ‘significant’ financial distress rose by 10.8% year-on-year to 666,876 businesses (Q2 2024: 601,950), which represents a 15.2% increase versus Q1 2025 (579,276).

Commenting on Begbies Traynor’s latest Red Flag alert, Mark Goodwin, founder and managing director at Optimise said:

“The increase in companies facing critical financial distress comes as no surprise.

"With the economy firmly stuck in reverse gear and financial distress on the rise, there are numerous legitimate legal claims against former directors that might not be pursued due to lack of funds. Optimise is here to bridge this gap, ensuring that insolvency practitioners and creditor estates receive maximum returns. By providing the necessary funding, we help ensure that justice is served and creditors are fairly compensated."

Optimise is currently funding in excess of £10 million worth of live claims covering directors’ loan accounts, breach of contract, breach of duty, transactions at undervalue, preference, unlawful dividends, wrongful trading and claims against third parties.