Facing Financial Distress: What’s next for my business?
The UK’s business landscape is facing an alarming crisis, with financial distress surging to new highs.
According to the latest Red Flag Alert report from Begbies Traynor, the number of businesses in ‘critical’ financial distress jumped by 50.2% in Q4 2024, reaching 46,853 – just three months after the Budget. This sharp rise highlights growing economic instability, with 21 out of 22 sectors experiencing worsening financial health.
Consumer-facing industries have been hit particularly hard, with Hotels & Accommodation (+83.6%), Leisure & Cultural Activities (+76.5%), and General Retailers (+47.6%) among the worst affected. Meanwhile, ‘significant’ financial distress, an early warning of deeper financial trouble, rose 21.3% year-on-year, impacting over 654,000 businesses. With distress spreading across key sectors such as Construction, Support Services, and Real Estate, the UK economy is facing a challenging road ahead and businesses must adapt quickly to navigate through these difficult times.
For many, recovery will require a strategic turnaround, focused not just on short-term survival but on long-term sustainability. In this environment, companies need to take a hard look at their operations, identify areas of inefficiency, and recalibrate their strategies to weather the storm. Turning around a business in distress is no easy feat, but it is possible. The key lies in making decisive moves, whether it’s restructuring, rethinking business models, or optimising financial management.
In this blog, we take a look at steps to take for companies looking to recover and come out stronger on the other side.
Company Turnaround and Restructuring
When your business faces challenges, knowing where to turn and getting help promptly is crucial. While there are several resources available – including free advice from organisations like Business Debtline and support from banks and HMRC – professional guidance can make all the difference.
The earlier you seek help, the more options remain available. There are many recovery strategies that your business could implement, which could help prevent formal insolvency or form part of a formal insolvency process. The key difference lies in timing and the company’s financial position.
Early Intervention (Pre-insolvency):
- When a company identifies financial difficulties early, turnaround and restructuring can help avoid formal insolvency
- This might involve operational changes, debt restructuring, cost-cutting, or refinancing
- The company remains solvent throughout this process
As Part of Formal Insolvency:
- Restructuring can be implemented through formal processes like:
- Company Voluntary Arrangements (CVAs)
- Administration
- Pre-pack Administration
- Restructuring Plans under Part 26A of the Companies Act
At Bretts Business Recovery we follow a systematic approach to helping businesses in distress:
- We begin with a comprehensive assessment of your company’s trading performance to identify the root causes of financial challenges.
- We evaluate whether the business is viable or has the potential to become viable moving forward and consider whether formal insolvency proceedings can be avoided, for example by the business trading its way out of its current situation.
- We explore refinancing options or assess whether restructuring would provide a more beneficial outcome.
- If formal insolvency becomes unavoidable, we’ll advise on the available options.
- We also provide support in creditor negotiations during the short term while developing a formal survival plan.
Throughout the process, we offer practical guidance and actionable solutions to ensure your company’s survival, along with a clear exit strategy for you and all stakeholders.
Most importantly, businesses receive tailored support based on their unique circumstances, at a reasonable investment – one that offers the potential for a significant return.
Many business owners hesitate to seek professional advice, fearing they’ll be pushed toward formal insolvency. However, our experience shows that with early intervention, many businesses successfully navigate financial challenges without requiring formal insolvency procedures.
Take Action Today
If your business is experiencing difficulties but you believe in its potential for recovery, don’t wait to seek professional advice. Our team of experienced practitioners is here to help you evaluate your options and develop a practical path forward.
Contact us today for a confidential discussion about your business situation. Email enquiries@brettsbr.co.uk or give us a call on 08081687540