The number of Welsh businesses in “critical” financial distress increased year-on-year by more than half (+50.4%) to 1,847 in the first quarter of 2026 compared to the same period last year.
According to research from financial and real estate advisory group BTG, which has monitored the financial health of UK companies for more than two decades, this annual rise in Wales is well above the UK average of just over a third (36.9%) to 62,193 in Q1 2025 compared to the same period the year before.
The research also revealed there were 17,566 businesses across Wales in “significant” financial distress, up 11.6% year-on-year. This is also a starker increase than the UK average, which increased by 9.6% annually to 634,867.
Rising taxes on businesses across the year, including increases to employer’s National Insurance contribution and national minimum and living wage hikes, form part of the complex picture of challenges driving increased “critical” distress. These challenges have been exacerbated by energy and materials inflation following the outbreak of war in the Middle East towards the end of the quarter.
On a city level, Swansea (+15.5%, Q1 2026 – 558), Newport (+15.5%, Q1 2026 – 1,123), and Bangor (+17.1%, Q1 2026 – 432) followed the same trend as the rest of Wales with annual increases in ‘significant’ distress. On the other hand, the data revealed some resilience from businesses in the capital, with Cardiff (-0.5%, Q1 2026 – 2,112) experiencing a slight year-on-year decrease in ‘significant’ financial distress.
The industries with the highest numbers of businesses in significant financial distress across Wales were Construction (+13.8%, Q1 2026 – 3,241), Real Estate and Property (+18.6%, Q1 2026 – 1,898) and Support Services (+11.7%, Q1 2026 – 2,091).
With the rising cost of living and ongoing economic uncertainty continuing to produce subdued consumer confidence, business in sectors reliant on discretionary spending, such as hospitality, leisure and retail, continue to experience sharp rises in distress across the UK. This is reflected in the Welsh data, which found some of the highest annual rises of ‘significant’ financial distress for businesses in ‘Leisure and Cultural Activities’ (+19.6%, Q1 2025 – 562), ‘Sports and Health Clubs’ (+17.6, Q1 2025 – 454) and Travel and Tourism (+25.2%, Q1 2025 – 114).
Huw Powell, Partner at BTG’s Cardiff office, said:
“As we entered 2026, business leaders across Wales would have been hoping for some signs of recovery in spending, confidence, investment and growth. Instead, the hand Welsh businesses have been dealt is a mix of rising energy bills, inflation, interest rates and unemployment, which will be made worse by the ongoing War in the Middle East.
“If people continue to tighten their belts, Welsh businesses reliant on discretionary spending are going to be under immense pressure to keep a strong bottom line as their costs rise and income drops. This will inevitably mean financial distress will rise further for these businesses, pushing towards and over the edge of insolvency and closure. The impact of closures and job losses on local economies will be stark, with shockwaves impacting other sectors with high levels of distress, such as construction, real estate and manufacturing, as spending continues to dry up.
“Unfortunately, no company is immune to such a major geopolitical shock to the economy, but some can find ways to mitigate the impact and emerge strong on the other side. From experience, it is the businesses who take action early during such crises and focus on saving costs, driving up stagnant productivity, trimming their operations and taking opportunities who stand the best chance of survival. Business leaders in Wales who engage with advice early to create restructuring plans could find opportunities for finance, selling of surplus property and assets and even investment to get back on the path to growth, and in the process endeavour to avoid drastic measures like job cuts and closures.”
