Source: Sharecast
In a statement on Friday, Begbies Traynor's executive chair Ric Traynor warned that the first quarter "could be the calm before the storm" with the Trump administration's trade tariffs not kicking in until April. These are "likely to impact growth and suppress profitability for some time", he said.
In the company's Red Flag Report for the first quarter, Begbies Traynor said 45,416 companies were in "critical" financial distress over the three-month period, up 13.1% on last year, though down 3.1% from the fourth quarter.
Consumer-facing industries fared the worst, with the number of bars and restaurants in a critical condition up 31.2%, along with 25.5% more travel and tourism firms than last year, while general retailers in a critical state rose by 12.4%.
Meanwhile, a large number of real estate and property services firms and construction companies also reported critical financial distress, Begbies Traynor said.
According to the report, 14 of the 22 sectors covered by the research experienced a double-digit increase in critical numbers.
At the same time, the number of businesses in "significant" financial distress was 4.5% higher than last year at 579,276 firms.
Julie Palmer, partner at Begbies Traynor, said optimism "remains in short supply for UK businesses", with eyes firmly fixed on the impact of US tariffs and increases to homegrown taxes.
"However, there is a small window of opportunity for business leaders who stand at the crossroads and must decide which path to take. Restructuring, refinancing, selling or closing will be options many will have to decide between, so navigating towards the right outcome will be the target for 2025," Palmer said.
"Sadly, I fear there will be many potholes that cannot be avoided later this year which will prove too much for some."
Shares in Begbies Traynor were up 1% at 98.18 in early deals on Friday.