The latest Societal Impact report from The Institute for Turnaround (IFT) reveals troubling trends in the UK business landscape, with a particular focus on the retail sector.
According to the report, nearly half (46%) of IFT members predict an increase in company failures, as the number of distressed businesses across the UK has risen sharply.
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The retail sector, along with construction and professional services, is bearing the brunt of these challenges.
A sharp rise in corporate distress
The IFT’s findings underscore a significant increase in corporate distress, with a near 10% rise in distressed businesses in 2024 alone, marking a staggering 60% increase since 2017.
Sectors heavily reliant on consumer demand, such as retail, continue to feel the effects of long-term disruptions that originated during the Covid-19 pandemic.
Supply chain issues, inflation, and global instability have compounded these challenges, while the retail industry also faces heightened payroll costs, with expenses rising by 10% annually since 2022.
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By GlobalDataMilly Camley, CEO of IFT, commented, “These are the very businesses that could benefit from the UK’s breadth and depth of turnaround support and expertise, but the reality continues to be that many do not take advantage of such support or may seek support simply too late.”
Despite these concerns, IFT members have delivered substantial results in 2024, with £3.1 billion in added shareholder value and 56,000 jobs safeguarded.
Furthermore, 78% of IFT members expect continued growth in turnaround activity in 2025, signalling that there is still optimism for recovery in troubled sectors.
Retail and other key sectors struggling
The retail sector remains one of the hardest-hit industries, with many companies struggling to restructure and adapt.
A popular method for helping struggling retailers is the use of Restructuring Plans (RPs), a modern alternative to Company Voluntary Arrangements (CVAs), which are increasingly being used to recalibrate store portfolios.
These plans have gained traction, providing a more flexible solution to help retailers stabilise.
However, the outlook remains challenging. Nearly half (46%) of IFT members foresee an uptick in company failures, with the retail, wholesale, and construction sectors all reporting high levels of distress.
“Ultimately, challenges will persist and the consumer sector faces numerous headwinds,” said Claire Burden, Chair at IFT. “British businesses must prioritise planning, particularly when it comes to liquidity and financing.”
The report also highlights that the greatest challenges for distressed businesses in the coming months are internal, such as board bandwidth and fatigue (40%) and the depletion of working capital (37%).
This suggests that the pressures on company leadership are becoming increasingly difficult to manage, especially when dealing with external economic factors.
Regional impact and sectoral insights
Corporate distress has spread across all UK regions, with Wales & Borders seeing the largest increase at 17%. London has overtaken the South East as the region with the most company insolvencies, with 3,295 reported from Q1 to Q3 in 2024.
The report also notes a surge in turnaround activity in the automotive sector, which has risen in IFT rankings due to regulatory changes that have placed additional pressure on the industry.
While manufacturing remains the dominant sector for IFT members, construction and the automotive industries are showing increasing levels of distress.
Despite the overall increase in insolvencies, IFT members continue to focus on business transformation, with 61% highlighting it as a key area of work.
As the UK economy grapples with ongoing challenges, the IFT’s report paints a stark picture of the state of corporate distress, particularly within the retail and construction sectors.
However, the report also highlights the critical role of turnaround professionals in supporting businesses through these difficult times, underscoring the need for decisive action, early intervention, and strategic planning.
