Birmingham sees 29 per cent year-on-year increase of businesses in distress

More than 8,000 Birmingham companies are now classed as being in ‘significant’ economic distress, according to the latest figures from Begbies Traynor’s ‘Red Flag Alert’, which monitors the financial health of UK companies.

Weakness in consumer confidence, plus ongoing economic concerns, are putting considerable pressure on businesses across the city, with 8,154 at risk of economic failure. This This represents a quarterly increase of 12.3 per cent, and an annual rise of 28.7 per cent.

Looking at the sector picture, there are 1,346 support services businesses in significant distress in Birmingham, making it the most troubled sector in the city.

There have also been significant increases in the number of media and health & education businesses facing difficulties, with these industries seeing annual increases of 58.1 per cent and 46.1 per cent respectively. 

Nationally the latest Red Flag Alert research for Q2 2024 recorded 601,950 businesses in significant distress, which is 36.9 per cent higher than the same period in 2023.

During Q2 2024, ‘critical’ financial distress also increased year-on-year by 34.5 per cent to 40,613 companies, with a large number expected to enter insolvency over the next 12 months.

This is being driven by notable increases in sectors such as automotive, transportation & logistics and bars & restaurants.

Craig Povey, partner at Begbies Traynor in Birmingham, said: “It looks like 2024 will prove to be another tough year for businesses.

“We are a little over halfway through the year and the macro-economic environment remains extremely testing, with the latest Red Flag Alert data highlighting a substantial increase in the number of businesses in significant financial distress in comparison to this time last year.

“A continuation of falling inflation levels will be especially helpful for businesses, particularly if interest rates begin to inch backwards later this year.

“Beyond these small glimmers of hope, all eyes are now on our new Government as we ask ourselves what they can do to kickstart economic growth in the UK.

“However, the reality is that the Government may not be able to act fast enough to stop many struggling businesses from succumbing to the economic pressures with which they are currently grappling.

“In short, the prevailing economic situation means that we still expect to see heightened levels of company insolvencies extend into 2025 and beyond.”

“Businesses will also be braced for the impact of a raft of legislative changes, following the recent opening of parliament.

While many of the measures outlined in the King’s Speech were welcomed as positive for business, there was some concern about the financial impact of some of the proposed employment law changes, however, we await the details with interest.”