The number of UK businesses in “critical financial distress” has jumped by almost a tenth amid particular pressure on leisure firms and hotels, according to research.

The downbeat outlook for British firms comes amid a backdrop of global economic uncertainty and rising costs.

Begbies Traynor Group’s (BTG) latest quarterly red flag report indicated that more firms edged closer to collapse in the second quarter of the year.

It found that the number of companies considered in “critical financial distress” rose by 9% to 53,756 for the three months to the end of June, compared with a year earlier.

All but one of the 22 sectors covered by the research reported an increase in firms under “critical” distress.

Leisure and culture firms were the worst affected with a 27.1% increase year-on-year, while hotel and accommodation firms saw a 26.6% rise.

Elsewhere, the number of sports and health clubs in critical distress rose by 21% to 980, with food and drug retailers up 18.4%.

The number of businesses in “significant” financial distress, meanwhile, rose by 1.1% 674,030 firms.

Julie Palmer, managing partner at BTG, said: “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.”

Ric Traynor, executive chairman at BTG, said: “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.”