Thousands of UK businesses are in ‘critical’ financial distress as the UK economy advances towards major tariff and tax regime changes.

The latest Red Flag Alert report from corporate restructuring specialist Begbies Traynor, indicates that as of end of March 2025, 45,416 businesses were in ‘critical’ financial distress – a 13.1% rise versus Q1 2024, despite a 3.1% fall during the first quarter of 2025 (Q4 2024, 46,853).

Significantly, three of the bellwether sectors in the UK: real estate & property services (6,480 companies), construction (6,367 companies) and general retailers (3,401 companies), represented more than a third of the companies in ‘critical’ financial distress, highlighting the perilous situation for the UK economy.

Overall, ‘significant’ financial distress is most pronounced in the support services (86,725), construction (86,312) and real estate & property services (68,744) sectors.

Commenting, Begbies Traynor partner Julie Palmer: “As we progress through 2025, optimism remains in short supply for UK businesses. The first quarter of the new year started positively with unexpected economic growth figures, positive retail sales and cooling inflation – and that is reflected in our latest data.

“Indeed, the travel and hospitality sectors may see an opportunity to attract tourists looking to holiday somewhere else other than the US. However, every business in the UK will have their eyes fixed on the impact of US tariffs and increases to homegrown taxes and that could make the situation even worse.”