The number of Welsh businesses in critical financial distress has increased, according to the latest Red Flag Alert research from insolvency firm BTG, formerly known as Begbies Taylor Group.
Some 1,362 Welsh firms were deemed to be in a critical state in the second quarter (Q2) of this year, a rise of 2.4% compared with Q2 of 2025. However, this increase was the lowest of any UK nation or region. For the UK as a whole, there was an increase of 9% on the year.
Significant financial distress figures
BTG said 16,264 businesses across Wales were classified as being in significant financial distress. This was down 5.5% year-on-year and 7.4% on Q1.
Half of local authority areas experienced an annual increase in the number of firms in significant financial distress. The biggest rise, up 25.2%, was in Anglesey, followed by Merthyr at 14.9% and Wrexham at 13.1%.
There were falls in 11 local authority areas, with the biggest year-on-year decline being seen in the Vale of Glamorgan, down 18.3%, Cardiff at 15% and Caerphilly at 11.2%.
UK-wide trends and expert commentary
For the UK as a whole, the number of companies in significant financial distress increased 1% year-on-year to 674,030.
Huw Powell, partner at BTG in Wales, said: "As we enter the second half of 2026, businesses across Wales will be hoping that the tides will begin to turn under Andy Burnham's new UK Government. With financial distress remaining high, firms are walking a tightrope, and any further increases to energy costs, inflation or interest rates could cause many to lose their balance."
Powell added: "Unfortunately, as conditions stand, with bond rates higher than the peak levels reached during the Liz Truss 'mini-budget' crisis of 2022, it seems that the UK is likely to face further cost and interest rate increases in the next half of the year. With confidence and spending already at rock bottom, any resulting shockwaves will be felt across all industries in Wales."
Sector impacts and political outlook
He continued: "UK consumer facing sectors have felt the brunt of the drop in spending and confidence, while industries like construction and real estate sectors have suffered the knock-on impact of rising costs and interest rates brought about by macroeconomic factors. It is clear that addressing the cost of living crisis is high on Burnham's agenda, but we may have to wait until the expected Autumn budget before we really understand what changes to taxes, spending and fiscal policy will be implemented."
Powell also noted: "Across the Welsh economy there will be a collective holding of breath as firms await announcements from Burnham and Stephen Kinnock as the new Secretary of State for Wales and we assess how their plans will roll out in Wales. With further devolution of power potentially on the table, Rhun ap Iowerth will be a very interested observer, as will all of those who would like to resist more power being given to the Senedd."
He concluded: "There is hope that Burnham will bring new optimism to help troubled firms navigate these difficult times and provide a platform for recovery and growth in the long term. There's a rocky road ahead for Wales and the UK as insolvency rates typically land later than increases in economic distress and, with winding up petitions coming through faster than ever, we could still see more businesses collapsing well into 2027."
