UK businesses are in financial crisis due to the negative economic conditions triggered by a series of interest rate hikes. The latest ‘Red Flag Alert’ issued by the Begbies Group found that 47,477 UK firms were in severe financial distress in the last quarter of last year and were struggling with inflation and borrowing costs.

The surge marked the second consecutive quarter of a period in which critical financial crises increased by 25%, the report noted. A significant percentage of businesses facing these conditions are predicted to enter financial distress and bankruptcy over the course of the next year.

According to Julie Palmer, partner at Begbies Trainer, weak consumer confidence amid rising interest rates, rising inflation and rising and “unexpected” input costs has created an economic storm for British businesses.

The Bank of England has continued to raise interest rates from 0.1% at the end of 2021 to the current 5.25% in an effort to control inflation.

Palmer said the macroeconomic turmoil was affecting “every corner” of the UK economy, noting that the most serious concerns were in the construction and real estate sectors. According to the report, around 540,000 British companies were in significant distress in the final quarter of last year, up 12.9% from the third quarter.