The Business Distress Index Q2 2024

The latest Business Distress Index statistics from Real Business Rescue show that small to medium-sized enterprises (SMEs) across the UK are up against high interest rates and an unprecedented cost-of-living crisis.

Our new data for Q2 2024 (April to June) shows how businesses are battling economic conditions and political uncertainty, following the UK General Election announcement during this period which saw the onset of intense political campaigning.

The Business Distress Index for Q2 2024 shows how key UK sectors are faring and connects the link between business distress and UK insolvencies.

How many SMEs are in distress?

Construction remains the sector with the greatest number of businesses in significant financial distress at 89,824 in Q2 2024 vs 83,332 in Q4 2023.

Construction firms are bearing the brunt as the mortgage market continues to be rocked by high interest rates which means reduced investment and high maintenance costs.

With a new Labour government on the horizon, new projects screeched to a standstill as the possibility that government backing would be withdrawn became a very likely prospect, along with new housing targets and an overhaul of spending plans.

The top five sectors in significant financial distress after Construction include Support Services (89,763), Real Estate & Property Services (65,919), Professional Services (50,683), General Retailers (42,992), Health & Education (39,933).

“The Business Distress Index shows that while some businesses have steadily recovered from Covid-19 economic instability, those that were the hardest hit, such as the construction industry, are playing catch up, amid new pressures approaching their way,” comments Shaun Barton, National Online Business Operations Director at Real Business Rescue.

“Minimal movement to record-high interest rates have forced the hand of businesses to pause investment and reduce borrowing, both of which are essential tools in the business rescue toolbox.

“The number of company insolvencies in 2023, and the start of 2024, match up to that presented during the 2008 – 2009 recession, which is worrying, although brings into perspective the severity of the cost of living crisis.

“The number of CVLs was at the highest annual number since records began in 1960, and compulsory liquidations also crept higher. A combination of economic and political uncertainty would no doubt have contributed to this figure, albeit minimally, alongside concurrent pressures, such as high interest rates which resulted in subdued demand.”

Analysing business distress figures for UK sectors

Most sectors we’ve analysed show a year-on-year increase, with construction at the top of the list of distressed sectors.

General Retailers show the greatest % increase in significant financial distress levels (42,992 – a dramatic 28% rise, followed by Media (24,831, 17% rise), Telecommunications & Information Technology (39,659 – 12% rise), Health & Education (39,933 – 11% rise) and Support Services (89,763 – 9% rise).

UK regional business distress figures

From a regional perspective, significant distress figures increased across the UK, with the highest rise in Scotland at 55%, Wales at 20% and the North East at 18%.

The region with the highest level of distressed businesses is London at 169,442, followed by the South East at 102,288.

Q2 2024 comparison with Q4 2023

The construction sector continues to present the highest levels of distress in both categories; significant and critical. This includes companies presenting deterioration in key financial ratios, such as working capital, contingent liabilities, retained profits and net worth.

When comparing insolvencies year-on-year, company insolvencies in 2023 and the first half of 2024 matched up to recession levels in 2008-09, which was the deepest financial crisis since World War II.

Need to speak to someone?

If your company is struggling with business debts, restricted cash flow, or the possibility of an unviable future, you are not alone. We help company directors just like you every single day, and we are here to give you the help and advice you need.

Call our team today on 0808 253 3818.