Over 610,000 UK firms in significant distress as CCJs soar 52 per cent

The latest Red Flag Report from Begbies Traynor has laid bare the struggles facing UK business during the current economic crisis, with 610,405 business rated as being in “significant” financial distress in Q4 2022, up 4 per cent from the same period a year earlier.

“Critical” financial distress, meanwhile, increased 36 per cent from Q4 2021 to Q4 2022 and was up 10 per cent between Q3 and Q4 2022. According to Begbies Traynor’s figures, this is the sixth consecutive quarter in which critical distress has risen.

The report found that 23,885 County Court Judgements (CCJs) were issued during the last quarter of 2022, a 52 per cent increase on the fourth quarter of 2021 and 77 per cent higher than during the same period of 2019, the last quarter before businesses were hit by the impact of COVID-19. Winding Up Petitions issued by company creditors, meanwhile, which represent a serious harbinger of approaching financial distress, stood at 576 during Q4 2022, an increase of 131 per cent from Q4 2021.

The figures highlight the cumulative impact of the many factors currently affecting UK businesses, including debts accrued during the COVID-19 pandemic, soaring inflation and costs, falling consumer confidence and the likelihood of the UK entering a recession.

Amid this outlook, Begbies Traynor warned that the UK’s small and medium-sized companies (SMEs) are particularly vulnerable, as they lack the financial reserves that larger businesses can fall back on during times of economic uncertainty.

Begbies Traynor partner Julie Palmer commented: “We’re taking calls from company bosses who are having trouble digging deep enough to keep battling on. They are already having to pay back the support they took to get through COVID and, anecdotally, we are hearing that both the Government and HMRC are becoming more determined in pursuing debts, while other creditors are increasingly turning to the law to recover their debts.”

“Throw in a such a gloomy economic outlook, with inflation at 40-year highs and interest rates at levels not seen for 14 years, and you can see why more and more companies are starting to feel the burden of their debts, making directors question whether they can go on.”

The report also warned that the outlook could yet worsen for UK businesses, with the government set to scale back support for companies impacted by rising energy prices from April. Begbies Traynor warned that reduced help with energy bills could leave companies facing tariffs at least three times higher than last year and is likely to lead to a spike in company insolvencies, with energy-intensive sectors such as hospitality (which has already seen a 157 per cent year-on-year increase in significant financial distress) construction and manufacturing especially vulnerable.

Begbies Traynor Executive Chairman Ric Traynor said: “Although we are – hopefully – about to pass the peak of inflation and the UK looks to have avoided recession at the end of last year, the strain is very clearly showing on businesses, as insolvency rates accelerate.”

“Interest rate hikes look set to continue into Q2 2023 placing further strain on the finances of both businesses and consumers. This, combined with a far less generous business energy support scheme and legacy COVID debts, do not bode well for many SMEs, and I fear that failure rates will continue to rise well into 2024.”

According to the report, the sectors with the most companies in significant financial distress were: Support Services (94,868 companies); Real Estate & Property (86,892); Construction (77,077); Professional Services (42,033); and Telecoms (41,207).


Read more about the surge in UK company insolvencies.

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