'No relief in sight': More than 50,000 British firms already in 'critical distress' as Labour plots fresh tax hikes

See more This is Money on Google - save us as a Preferred Source Updated: 02:01 EDT, 21 August 2026 More than 50,000 British firms are now in ‘critical financial distress’ with ‘no relief in sight’ as the Chancellor plots a fresh avalanche of tax hikes in the Budget.In a gloomy report that underlined the pressure on UK business, insolvency experts Begbies Traynor Group (BTG) said the number of companies on the brink has risen 9 per cent in the past year to 53,756.Consumer-facing businesses were the worst hit with levels of ‘critical distress’ among leisure firms and hotels up more than 25 per cent. Pubs, bars and restaurants suffered a near-11 per cent rise.Ric Traynor, executive chairman of BTG, said he expects the ‘shockwaves’ to spread to other industries this year and into 2027 as energy prices rise and confidence drains away.And BTG managing partner Julie Palmer sounded the alarm over a damaging period of uncertainty ahead of the Budget amid speculation Andy Burnham and his Chancellor John Healey are preparing yet more tax hikes.‘Businesses and investors will be looking for support and clarity as soon as possible from the government,’ she said.‘Business leaders will be desperate to avoid the prolonged period of uncertainty they experienced before the last Autumn Budget and will be hoping the new Prime Minister provides them with some clarity.‘As we have seen before, most firms can navigate choppy waters if they have time to prepare.’ John Healey and Andy Burnham have been warned of rising distress levels among British businesses - including pubsThe comments came after Burnham advisor Andy Haldane urged the PM and Healey to rule out further tax hikes and burdensome red tape ahead of the Budget to avoid ‘growth-stalling’ uncertainty.The new Labour leadership team is under pressure not to repeat the damaging speculation that preceded Rachel Reeves’s Budgets in 2024 and 2025, resulting in anxiety and caution among consumers and businesses.Haldane, a former chief economist at the Bank of England, said: ‘Another long bout of fiscal uncertainty would risk a hat-trick of growth-stalling Budgets and further panic in bond markets.’Economists believe Healey could announce £25billion of tax hikes in the Budget – on top of the £75billion imposed by Reeves – to fund Burnham’s lavish spending plans.Business leaders fear they could once again be the target having already been hammered by a £25billion national insurance tax raid alongside higher minimum wages and increased business rates bills.The tax onslaught and increased cost of employing staff has coincided with a sharp rise in energy bills stemming from conflict in the Middle East and a crippling wave of red tape such as new rights for workers.Traynor said: ‘Against a backdrop of ongoing geopolitical challenges, there appears to be no relief in sight for distressed UK businesses. With insolvency rates typically lagging economic distress, we could see increases in insolvencies in 2027.‘Rising energy prices are likely to push inflation higher again this autumn, squeezing consumers just as borrowing costs remain elevated. That would be a difficult backdrop for most sectors, but especially those reliant on discretionary spending, where confidence is already fragile.‘Sadly, when confidence and spending remain subdued, I expect the resulting shockwaves to be felt across many other industries later this year and into 2027.’Palmer added: ‘The persistent rate of critical and significant financial distress in the UK is a clear sign that businesses are walking a tightrope as we move through the second half of 2026.‘While some may be getting used to operating in this challenging environment, it is highly unlikely that business leaders will be feeling optimistic.‘Indeed, any further increases to energy costs or inflation, could accelerate financial distress and many will be thinking about restructuring or refinancing activities in a bid to improve their current situation.‘This is particularly true for consumer-facing industries reliant on discretionary spending who will be hoping for a boost from summer sales, alongside sectors reporting increasingly difficult trading conditions.’DIY INVESTING PLATFORMSAJ BellAJ BellEasy investing and ready-made portfoliosHargreaves LansdownHargreaves LansdownFree fund dealing and investment ideasinteractive investorinteractive investorFlat-fee investing from £4.99 per monthFreetradeFreetradeInvesting Isa now free on basic planTrading 212Trading 212Free share dealing and no account feeAffiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.Compare the best investing account for you