A record number of British businesses are in serious financial difficulty. According to advisory firm BTG’s Red Flag Alert report for the third quarter of 2026, 738,144 businesses are in “significant financial distress”. That is 1.6% more than a year earlier (726,594) and the highest since the research began in 2004. The report was published the day before the Budget.
There is also better news. The number of businesses in “critical” distress, i.e. closest to insolvency, fell by 20.7% year on year – to 44,033.
The deterioration is visible almost everywhere: in 20 of the 22 sectors monitored. The most businesses in difficulty are in support services (118,695), construction (108,340) and real estate and property services (99,908, up 9.7% year on year). HMRC data obtained through a freedom of information request show that at the end of August businesses owed a total of £27.3bn in VAT, corporation tax and PAYE arrears.
BTG chief executive Mark Fry points to a combination of rising employment costs, inflation, higher energy prices and more expensive borrowing.
What it means for you
Construction and services are sectors in which very many Poles in the UK work and run businesses. If you have a construction, cleaning, renovation or logistics business, your clients and subcontractors may also be in difficulty. That means a risk of late payments and unpaid invoices. For employees it is a signal to keep an eye on timely wages and pension contributions.
Our assessment
The fall in the number of businesses in critical distress shows that a wave of insolvencies is not inevitable. But a record number of businesses “on the edge” means that any cost increase in the Budget could tip the balance. We believe the coming months are a time for caution in extending credit to clients and for acting quickly at the first signs of cash-flow problems.
What to do
- Check new clients on the Companies House register (late accounts are a warning sign).
- Shorten payment terms and send reminders as soon as a payment is overdue.
- If you cannot pay tax on time, contact HMRC before the deadline and ask about paying in instalments: GOV.UK – difficulties paying HMRC.
- Free help for businesses in debt: Insolvency Service and Business Debtline.
Source: Business Matters – BTG Red Flag Alert report for Q3 2026 (27.10.2026).
We assess factual corrections and substantive responses. Verified changes are reflected in our reporting.
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