The Institute for Turnaround (The IFT) has released its fifth Societal Impact report, surveying its members and highlighting that UK corporate distress shows no signs of easing, despite some increased economic stability.
This year, the number of distressed businesses across UK regions has risen by nearly 10% on average, representing a staggering 60% increase since 2017.
The South East remains the UK region with the highest number of distressed businesses (40,252), followed by London (35,449) – reflecting the higher level of business activity in these regions.
However, London recorded the highest number of company insolvencies (3,295), overtaking the South East for the first time in four years.
Despite the challenges, The IFT members have delivered significant positive outcomes for UK businesses in 2024, directly contributing to the greater resilience of UK plc.
Key findings are:
- £3.1 billion in added shareholder value generated by independent members
- 56,000 jobs were safeguarded, enabled by independent turnaround expertise, a slight increase over the previous year
- Over 80% of IFT members report activity levels comparable to or busier than in 2023
- Nearly four-fifths (78%) of members expect further growth in turnaround activity in 2025
Looking at service hotspots, the majority (61%) of The IFT members continue to focus on business transformation as a key area of their work, supporting businesses to adapt, transform and succeed in the longer term.
Despite a decline in insolvency rates since 2023, distress remains pervasive, with nearly half (46%) of IFT members forecasting an increase in company failures due to the current operating environment.
Key challenges contributing to this outlook include servicing high levels of debt, the depletion of working capital and difficulties accessing further funding.
The IFT members consider that the biggest challenges for distressed but viable companies in the coming months will be internal ones, such as board bandwidth or fatigue (40%) and the depletion of working capital (37%).
When asked why businesses in distress fail to seek support at an early stage, 81% continue to cite cultural and psychological resistance to external advice as the primary barrier. This was closely followed by a lack of awareness of difficulties (62%) and understanding regarding the turnaround process.
Other findings from the annual report include:
- All areas of the UK saw an increase in the number of distressed companies (ranging from between 7% and 17%)
- Companies in the Wales & Borders region have seen the biggest jump in corporate distress, rising 17% year-on-year, followed by the Isle of Man and the South West of England
- London overtook the South East to become the leading region for insolvencies, with 3,295 company insolvencies Q1-Q3 2024
- The top three sectors for both distress and insolvencies remained wholesale, retail and repairs, construction, and professional, scientific and technical activities, with construction seeing the highest number of insolvencies
- Manufacturing remains the dominant sector for The IFT members, followed by construction
- The automotive sector has also risen in turnaround activity rankings for The IFT independent members, moving from ninth to third place, as regulatory changes have pressured the industry
Milly Camley, CEO at The IFT, said: “London and the South East are two of the most dynamic and resilient regions in the UK, but the economic environment has created an unprecedented squeeze.
“From tech startups in London to traditional manufacturing hubs in the South East, businesses are grappling with a lack of working capital, increased debt servicing costs and, for many, shrinking demand.
“Yet this region is also home to some of the most innovative and adaptive businesses we’ve worked with. The companies that act early – those that aren’t afraid to ask for help when the warning signs first appear – are the ones that tend to thrive, even in tough times.
“Turnaround is possible, and we’ve seen incredible recoveries this year, even in the most challenging sectors.”
Claire Burden, chair at The IFT, added: “Ultimately, challenges will persist, and we need to look at the automotive sector as an example of how quickly difficulties can rise to the surface.
“British businesses must prioritise planning, particularly when it comes to liquidity and financing. Engaging early enables business leaders to address issues before they become critical, whether that involves renegotiating contracts, adjusting working capital strategies, or seeking external financing.”
