A record 738,144 UK businesses were in significant financial distress in the third quarter of 2026, according to research published today by advisory group BTG, the day before the Chancellor, John Healey, delivers his first Budget.
The figure, from BTG’s Red Flag Alert report, was 1.6 per cent higher than the 726,594 recorded in the same period last year and is the highest since the research began in 2004. BTG said 20 of the 22 sectors it monitors recorded an increase in significant distress.
Support services had the largest number of businesses in significant distress, at 118,695, followed by construction at 108,340 and real estate and property services at 99,908, which BTG said was up 9.7 per cent year on year.
The number of businesses in critical financial distress, the report’s most severe category, fell 20.7 per cent year on year to 44,033, BTG said.
The firm also said a Freedom of Information request to HMRC showed £27.3bn was owed in VAT, corporation tax and PAYE arrears as of 31 August. On Friday, a National Audit Office report found that HMRC expects £12.9bn of tax debt to go uncollected.
Mark Fry, group chief executive of BTG, said: “The Autumn Budget will inevitably attract considerable attention, but many businesses are already battling a combination of rising employment costs, inflationary pressures, higher energy prices and elevated borrowing costs.”
Julie Palmer, managing partner at BTG, said: “Businesses should not wait before reviewing their position. Those that identify pressure early and take action to protect cash flow, manage debt and strengthen their balance sheets will have more options than those that wait until the position becomes untenable.”
The Chancellor confirmed in a letter to the Treasury Select Committee that the Budget will be held on 28 October.
Separate research published last week by Novuna Business Finance found that 86 per cent of small businesses feared potential Budget announcements could negatively affect their finances and growth prospects. Just 26 per cent expected their business to grow in the final three months of the year.
Of the small businesses surveyed, 53 per cent were concerned about the possibility of further increases to employer National Insurance, while 47 per cent cited VAT rises. The figures reflect owners’ concerns about possible announcements, not confirmed Budget measures.
The Chancellor was reported last month to be considering changes to small business rates relief for the Budget.
Molly Monks of Parker Walsh, who advises businesses facing financial difficulties, said firms should not wait for the Chancellor’s announcements before reviewing their finances.
She said: “When so many businesses are already under pressure, even relatively small changes to operating costs can make a difference to whether a company remains viable. The Budget will matter, but business owners cannot afford to put off difficult decisions while they wait to see what the Chancellor announces.
“The biggest mistake is often waiting until there is no money left to act. If you are struggling to pay suppliers, falling behind on tax liabilities or relying on incoming payments to cover overdue bills, those are warning signs that need attention now.”
Official figures published last week by the Insolvency Service showed 1,882 company insolvencies in England and Wales in September, 5 per cent fewer than a year earlier.
Compulsory liquidations rose 25 per cent year on year to 341, while creditors’ voluntary liquidations fell 9 per cent to 1,420. The Insolvency Service said monthly insolvency numbers in the first nine months of 2026 were lower than the average of the preceding three years.
Ms Monks said: “Being busy does not necessarily mean a business is financially healthy. You can have a full order book and still struggle if customers pay late, supplier costs rise or tax bills fall due before the money comes in.”
She added: “Do not assume the Budget will solve your problems, or that things will inevitably get worse. Work out what any changes mean for your own costs and cash flow, and seek professional advice if you can see a shortfall coming.
“The earlier you act, the more options you may have to negotiate with creditors, restructure debts or change how the business operates.”
Amy Ingham
Amy Ingham is a reporter at Business Matters, covering UK business news with a focus on breaking news, business policy, late payments and insolvency. She joined the magazine in 2026 after completing the NCTJ Diploma in Journalism at Harlow College's journalism school. Her recent reporting includes British Steel's nationalisation and its impact on SME suppliers, the decline in late payments by large firms, and Insolvency Service director disqualifications. Reach her at aingham@cbmeg.co.uk.
