The levels of ‘critical’ financial distress jumped dramatically in Q4 2023, up 25.9% on the prior quarter (Q3 2023: 37,772), leaving more than 47,000 businesses near collapse in the UK at the start of 2024.

539,900 UK businesses are now in ‘significant’ financial distress, 12.9% higher than Q3 2023 and 5.6% higher year-on-year (Q4 2022: 511,093).

In Q4 2023, critical financial distress grew rapidly in the construction (+32.6%), health and education (+41.3%), real estate and property services (+24.7%) and support services (+23.6%) sectors.

The key sectors driving this increase continue to be the construction, real estate and property and support services sectors, up 32.6%, 24.7% and 23.6% respectively.

Julie Palmer, partner at Begbies Traynor, said: “After a difficult year for British businesses that was characterised by high interest rates, rampant inflation, weak consumer confidence and rising and unpredictable input costs, we are now seeing this perfect storm impacting every corner of the economy.

•   The Finance Professional Show 2023: The Video
•   Ministry of Defence appoints Laing O'Rourke to deliver new army basic training facilities in Surrey
•   Paragon completes £5.4m development facility for Nottingham housing scheme

“Now that the era of cheap money is firmly a thing of the past, hundreds of thousands of businesses in the UK, who loaded up on affordable debt during those halcyon days, are now coming to terms with the added burden this will have on their finances.

“For some, a better-than-expected Christmas may kick these concerns down the road for a little longer, but the rapid growth in the levels of critical financial distress point to an economy that is waking up to the danger of debt ladened businesses in a higher rates environment.

“As we saw in the previous quarter, the strain being placed on companies has extended well beyond the consumer facing businesses with bellwether sectors, like construction and real estate, now in serious jeopardy as over 15,000 businesses face high risk of failure.

“Sadly, for tens of thousands of British businesses who should be looking ahead to 2024 with some degree of optimism, the new year will bring a fight for survival as the debt storm that has been brewing for years looks like it is breaking across the country.”