Big rise in distressed companies in Wales

Almost 19,300 Welsh companies are now classed as being in ‘significant’ financial distress, according to research from insolvency practice Begbies Traynor.

Its latest quarterly Red Flag Alert, which monitors the financial health of UK companies, shows a rise in Q4 of 2024 in Wales of 32.1% on the previous year - although only 0.1% up on the quarter.

In Swansea it was up 28% (907 firms) on the year and 14.1% in Cardiff (2,254 firms).

The increase has been linked to ongoing economic uncertainty, coupled with the impending impact of the tax, national insurance and national minimum wage increases from April, following Rachel Reeves’ autumn Budget announced last autumn.

There are 3,266 construction related Welsh businesses in significant distress, making it the most troubled sector. There have also been significant increases in the number of retailers and travel and tourism businesses in Wales facing difficulties, with these industries seeing annual increases of 67.5% and 52.8% respectively,

UK-wide the Red Flag Alert research recorded 654,765 businesses in significant distress, which is 21.3% higher than the same period in 2023. In addition, there has been a worrying surge in the number of businesses in the UK entering ‘critical’ financial distress, rising by 50.2% to 46,853 companies.

Huw Powell, partner at Begbies Traynor for south Wales, said:“Even at this very early stage, the outlook for the rest of 2025 is challenging, and many companies are clearly struggling to adapt to the compounding issues they are facing. Unfortunately, there is no easy fix, which will be very unsettling for businesses who are struggling to tread water already.

“For many companies, which were already dealing with rising operational and borrowing costs, the increase in national insurance contributions and the national minimum wage announced at the last UK Budget, could result in further financial strain at a time when confidence is already low.