The number of businesses in the United Kingdom facing "critical" financial distress in the final three months of 2023 skyrocketed by 25 percent, according to a new report. And 47,000 of them are now on the brink of going under entirely as conditions worsen.
Despite continued government claims that economic conditions are just dandy, the U.K.'s business sector is quietly crumbling with increasing speed as insolvency specialists Begbies Traynor warn of a major economic crisis in their latest "Red Flag" report.
Thirty percent of all businesses in the U.K. currently facing financial distress are in the construction and property sectors, the report explains, pointing to another real estate crisis in the making.
The aforementioned 25 percent quarterly rate of increase in the number of companies facing critical financial distress in the U.K. included:
- a 32.6 percent increase in the construction industry
- a 41.3 percent increase in the health and education industries
- a 25 percent increase in real estate and property services
- a 24 percent increase in support services
(Related: The American economy is running on fumes as the consumer debt binge reaches an ominous and historic fever pitch.)
82% of U.K. economy recorded double-digit percentage growth in financial distress
Eighteen of the 22 economic sectors covered in the report recorded double-digit percentage growth in terms of the number of firms that reached critical financial status in the final three months of 2023. This amounts to 82 percent of the U.K. economy that saw an exceptionally speedy decline in Q4 of last year.
According to Julie Palmer, a partner at Begbies Traynor, tough macroeconomic conditions created a "perfect storm" for U.K. businesses, Traynor borrowing that "perfect storm" trope from none other than Donald Trump, who warned several years back about a coming "perfect storm."
"After a difficult year for British businesses that was characterized by high interest rates, rampant inflation, weak consumer confidence and rising and unpredictable input costs, we are now seeing this perfect storm impact every corner of the economy," Palmer said.
Much like what the private Federal Reserve is trying to do here in the United States to tame inflation, the Bank of England, another private central bank across the pond, raised interest rates from 0.1 percent at the end of 2021 to 5.25 percent today. This move stopped many struggling firms from accessing the cheap debt needed to remain financially "strong."
"Hundreds of thousands of businesses in the U.K., who loaded up on affordable debt during those halcyon days, are now coming to terms with the added burden this will have on their finances," Palmer added. "Sadly, for tens of thousands of British businesses who should be looking ahead with some degree of optimism, the new year will bring a fight for survival."
Compared to the third quarter of 2023, Q4 of last year saw a 12.9 percent increase in the number of U.K. businesses feeling "significant" financial stress, bringing the overall total of seriously struggling businesses to 539,000.
The vast majority of firms in this condition are based in London and the southeast portion of Great Britain. The fewest struggling firms are in the northeast and in Northern Ireland.
"Last year, the number of firms going bust had already reached the highest level since the great financial crisis [of 2008]," said Susannah Streeter, the head of money and markets at Hargreaves Lansdown. "A big chunk of those firms sending up alarm signals are expected to collapse over the next year, adding to expectations that a recession in the U.K. is imminent."
Governments everywhere are fudging the numbers and data to make their economies seem stronger and more resilient than they actually are. Find out more about the deception at Collapse.news.
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