The number of UK companies in “significant financial distress” experienced a drastic increase in the second quarter of 2024, with the leisure and tourism sectors particularly affected by weak consumer demand, according to the latest Begbies Traynor “Red Flag Alert” research.

The report, which has been monitoring British corporate health for almost 20 years, revealed that a staggering 601,950 companies are now in significant financial distress. This represents an 8.5% increase from the previous quarter and a 37% rise compared to the same period last year.

The grim picture is a continuation of the deterioration of the British economy post-pandemic, with company insolvency numbers at historically elevated levels and Construction, Real Estate, Financial and Support Services facing intense pressure.

A perfect storm of high interest rates, rampant inflation, weak consumer confidence and rising input costs has created a hostile environment for UK businesses, which are now struggling to sustain their debt.

2024 is panning out to be a challenging year for the UK economy in general, flatlining pre-election, with lagging productivity, low wages and chronically low investment spending serving as main barriers to growth opportunities.

Dragging growth is also limiting the new Labour government to offer some quick and much needed progress on restructuring and boosting the country’s strained health system, since Prime Minister Keir Starmer promised not to raise taxes.