More than 53,000 British businesses are facing severe financial pressure and could be at risk of collapse as economic uncertainty continues to weigh on consumer spending and business confidence.
The number of companies in critical financial distress increased by 9% to 53,756 in the three months to the end of June, compared with 49,309 during the same period last year, according to the latest Red Flag report from insolvency and restructuring firm BTG.
Julie Palmer, managing partner at BTG, said the figures showed businesses were facing increasing difficulties as they entered the second half of 2026.
“The persistent rate of critical and significant financial distress in the UK is a clear sign that businesses are walking a tightrope,” she said.
Almost every sector covered by the research recorded an annual increase in critical distress. Leisure and culture businesses were among the hardest hit, with the number of distressed firms rising 27.1% to 1,478.
Hotel and accommodation companies recorded a 26.6% increase to 510, while sports and health clubs saw a 21% rise to 980. Food and drug retailers also experienced significant pressure, with critical distress increasing 18.4% to 2,350 businesses.
BTG classifies companies as being in critical distress when they face serious liquidity problems, creditor enforcement action or formal legal proceedings such as winding-up petitions. Businesses in significant distress are under clear financial pressure but may still have time to restructure their finances, refinance or reduce costs.
The number of companies in significant distress increased 1.1% over the year to 674,030. Support services, construction and real estate and property services accounted for some of the largest numbers in this category.
The figures come amid several high-profile business failures and financial warnings. Construction contractor Ardmore moved towards administration in June, while retailer Mothercare recently warned of “material uncertainty” linked to debt refinancing, pension negotiations and weak trading.
London had the highest number of businesses in both categories, with 204,851 companies in significant distress and 17,718 in critical distress. The southeast, Midlands and northwest also recorded high numbers.
The report highlighted growing tax debts among struggling businesses. BTG estimated that HM Revenue and Customs was owed about £27 billion in corporation tax, VAT and PAYE at the end of 2025.
Court action against indebted companies is also increasing. Ministry of Justice figures cited by BTG showed 6,411 winding-up petitions were recorded last year, up 15.7% from the previous year.
BTG executive chairman Ric Traynor said there was little sign of immediate relief for distressed businesses. He warned that weak consumer spending and rising creditor action could create wider problems for other industries later this year and into 2027.
