UK business insolvences hit 20-year peak

The number of UK companies facing severe financial trouble reached its highest level in two decades this quarter. BTG, the insolvency practitioner formerly known as Begbies Traynor, reported that 738,144 businesses were in significant distress during the third quarter of 2026. This figure represents a 1.6% increase compared to the same period last year and marks the peak since BTG began publishing its red flag data in 2004.

Pressure is mounting on the government to address these figures before Chancellor John Healey delivers his first budget on Wednesday. The economic backdrop is volatile, with the war in the Middle East disrupting global markets and reigniting cost of living concerns. Healey has promised to provide households and businesses with more breathing space in the upcoming fiscal plan.

Certain industries are bearing the heaviest load. Support services, construction, and real estate recorded the highest absolute numbers of distressed firms, with 118,695, 108,340, and 99,908 companies respectively. The hospitality sector saw the steepest relative decline, with the number of bars and restaurants in distress rising by 5% to 18,866. Food and drug retailers also struggled, with struggling firms in this category increasing by more than 7% to reach 19,269.

Mark Fry, chief executive of BTG, stated that companies are battling rising employment costs, inflation, higher energy prices, and elevated borrowing costs. He noted that these pressures affect both small firms' ability to operate and larger companies' capacity to compete globally. Fry added that many businesses are approaching the budget from a position of financial weakness.

BTG's freedom of information request revealed that companies owed £27.3bn in arrears to HMRC for VAT, corporation tax, and PAYE at the end of August. While this is down from a pandemic peak of £51.3bn, it remains well above the pre-pandemic level of £11.4bn. Fry said that with such high debt levels and record distress, structural hurdles and red tape need to be tackled.

Prime Minister Andy Burnham pledged last week that his government would slash red tape for businesses. The plan includes clarifying compliance guidance, simplifying corporate reporting requirements, and extending import tariff suspensions on products favored by industry. These measures aim to reduce the administrative burden on companies already operating under financial strain.