The UK stock market, which has repeatedly reached new highs, may be hit hard by “red flag alerts”: Britain's “severely troubled” companies soared 78%

The Zhitong Finance App learned that according to a recent report by Begbies Traynor, a business consulting and corporate bankruptcy expert agency, the number of British companies in financial distress surged in the past year. The agency called on the British government to provide urgent support, otherwise they will face a major risk of a new wave of corporate bankruptcy. For the British stock market, which has repeatedly reached new highs since this year, the Begbies Traynor report may stimulate the market to lower profit expectations for British companies, which in turn will cause the UK FTSE 100 Index to continue to pull back from a high level.

According to the major report released on Thursday, the number of UK companies in “critical” financial difficulties rose sharply by 78% year over year, and by 12.6% from the previous quarter. The report points out that rising tax burdens on British companies, uncertainty in the economy and manufacturing industry, and long-standing inflation have been dragging down the entire British economy.

Begbies Traynor said the anguish that is spreading among UK businesses is widespread, with 21 of the 22 industry segments monitored by the expert agency reporting a “significant” deterioration in their financial health. According to the report, consumer-facing industries, such as leisure, hotels and retail, are facing a particularly severe macroeconomic situation, and “they continue to bear the main impact of ongoing economic uncertainty.”

British investors and families are preparing for the UK government's latest budget statement in November. Speculation is heating up. It is believed that British Chancellor of the Exchequer Rachel Reeves will have to “break the word” on her party's promise not to raise income taxes in order to make up for the British government's huge public finance gap, which may put further pressure on the UK's domestic economic activity and already weak business confidence for a long time.

Julie Palmer, a partner from Begbies Traynor, said this sudden surge indicates “the UK economy is in real long-term trouble.” “Currently, more than 55,000 British companies are in serious financial distress. The next budget must provide urgent and continuous support to avoid a wave of business failures and bankruptcies, especially among small and medium-sized enterprises in the UK that are already operating on thin ice.”

According to median estimates from a survey of economists compiled by the agency, the UK economy may grow by only 1.4% in 2025. The survey also showed that the UK's annual inflation is expected to reach 3.4%, far higher than the Bank of England's fixed target.

The above study, called “Red Flag Alert” (Red Flag Alert), has been measuring and in-depth research on financial difficulties in mainland Britain since 2004. It is based on specific accounts disclosed by the company and legal and financial statistics from a wide range of sources, including Begbies Traynor's own bankruptcy statistics business.

The above “Red Flag Alert” (Red Flag Alert) shows that the number of UK companies facing “critical (critical) financial difficulties” soared 78% year over year, +12.6% month-on-month, and 21 out of 22 industries deteriorated. The pressure was basically concentrated on domestic demand sectors such as leisure, hotels, and retail. Therefore, the direct guiding significance for the UK benchmark stock index, which has repeatedly reached new highs since this year, is that sector/industry indices, which mainly focus on domestic consumption and small and medium-sized enterprises, face both profit and financing challenges, so the FTSE 100 index and FTSE 250, which rose more than 20% during the year, may continue to decline from historical highs; for the UK bond market, slowing growth and rising risk of default usually greatly drive credit spreads on corporate bonds.