BTG Data Shows 738,144 UK Firms in Distress Ahead of Budget

The number of UK companies facing severe financial difficulties reached 738,144 in the third quarter of 2026. This figure marks the highest level recorded since the tracking metric began in 2004. Insolvency firm BTG released the data on Monday, intensifying pressure on the government to intervene before the upcoming budget.

The count rose by 1.6% compared to the same period in 2025. BTG, formerly known as Begbies Traynor, identifies these firms as being in its defined category of significant distress. The data indicates that the economic strain is broadening across key industrial sectors rather than remaining isolated to specific niches.

Support services, construction, and real estate recorded the highest absolute numbers of struggling businesses. These three sectors accounted for 118,695, 108,340, and 99,908 firms in significant distress, respectively. The hospitality industry experienced the steepest year-on-year percentage increase, with 18,866 bars and restaurants now in distress, a rise of 5%.

Food and drug retailers also saw substantial growth in financial trouble. The number of struggling businesses in this category increased by more than 7% to reach 19,269. BTG Chief Executive Mark Fry attributed the widespread strain to a combination of rising employment costs, inflation, higher energy prices, and elevated borrowing rates.

Fry stated that these pressures affect both small operators and large corporations competing globally. He noted that many firms are approaching the budget from a position of financial weakness. A freedom of information request by BTG revealed that businesses owed HMRC £27.3bn in tax arrears as of the end of August. This debt includes VAT, corporation tax, and PAYE.

The current arrears total is down from a pandemic peak of £51.3bn but remains well above the pre-pandemic level of £11.4bn. Fry said that high recovery activity alongside record distress levels suggests structural issues persist. He called for the budget to tackle red tape, employment legislation, and the tax burden to help firms compete.

Chancellor John Healey is scheduled to deliver his first budget on Wednesday. He has pledged to provide households and businesses with more breathing space. Prime Minister Andy Burnham recently promised to slash red tape by simplifying corporate reporting and extending import tariff suspensions. The budget will address these demands against a backdrop of global economic volatility driven by the Middle East conflict.