The latest report from Begbies Traynor shows that the number of companies in ‘critical’ distress has risen by 70%
Construction is now the second most significantly distressed industry according to Begbies Traynor, warning of an incoming potential construction industry financial crisis.
There are now 103,551 businesses in significant distress, while 7,361 businesses are in critical distress. The latter figure is 70.2% higher, year-on-year.
“The challenges for businesses remain substantial”
The report shows a dire situation for businesses in the UK, with inflation, rising costs, and geo-political tensions causing more difficuluties for all business, including construction.
Julie Palmer, partner at Begbies Traynor, said: “The steep increase in businesses in ‘critical’ financial distress shows the UK economy is in real trouble. With over 55,000 companies now in serious financial distress, the upcoming Budget must deliver urgent support to avoid a wave of failures, especially among SMEs already operating on a knife edge.
“Unfortunately for UK businesses, inflation is going nowhere, putting further pressure on companies at a time when wage, tax, and financing costs are already high. Many firms have no room to manoeuvre, and instead of investing for growth, are scaling back just to survive – the opposite of what the economy needs, if it’s going to recover and grow.
“The Government must get the Budget in November right, but the Chancellor faces a delicate balancing act between delivering ‘business friendly’ measures while balancing the books. There has been a lot of temperature testing in the run up to November, but it is critical that the final measures are decisively pro-business.”
“We are entering a critical phase. Consumer-facing sectors like retail, hospitality and leisure are already in deep distress and have little capacity to absorb further shocks or pressures on consumers, while many other industries are also treading water. Without meaningful support, we can expect more restructuring, rising insolvencies and a continued loss of economic confidence well into 2026.”
More details on the report can be found here.
Construction among the highest for insolvency rates
In September, the latest insolvency statistics were published, showing that construction continues to have some of the highest rates of insolvency, making up 15.2% of all insolvencies in England and Wales.
This marks an increase of 2.5% from June. In the 12 months to July 2025, there were 3,973 companies that entered insolvency, an increase of 23.5% from 2019.
Analysis by EY Parthenon noted that there are many factors to consider both within and outside the UK, writing: “Unpredictable tariff policy, rising employment costs and shifting regulatory frameworks are reshaping corporate behaviour. As the second half of the year begins, sectors exposed to discretionary spending and policy-sensitive industries like healthcare, retail and energy also face mounting pressure.
“When everything feels like a risk, it becomes harder to know which threats matter most. Companies can’t react to every event, but the speed of change means that a ‘wait and see’ approach isn’t an effective long-term strategy either. Businesses need a measured, scenario-based approach that balances agility with strategic clarity to face ongoing uncertainty.”
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