The firm’s Red Flag Alert research shows 329,834 UK companies were experiencing ‘significant’ financial distress at the end of Q2 2017, compared to 263,517 in Q2 2016. The firm says this represents the largest number of corporates experiencing significant distress in at least five years.

SMEs made up the majority of this increase, with ‘significant’ distress rising 26% to 308,423 businesses, while large companies saw distress rise by just 12% year-on-year to 21,411 businesses at the end of Q2 2017.

Among the sectors facing the largest increases in significant financial distress, property and construction saw substantial rises of 32% and 22% respectively.

The research also shows that the UK sectors most reliant on consumer spending have been hit particularly hard during the second quarter, with volumes of financial distress increasing year-on-year by 22% among leisure businesses , 17% for general retailers, 17% for automotive companies  and 16% among bars and restaurants.

Julie Palmer, Begbies Traynor regional managing partner, said: ‘While we are seeing rising levels of distress across all corners of the UK economy, the quarterly deterioration in the property and construction sectors is particularly concerning, raising doubts over whether they have strong enough foundations to cope with upcoming headwinds, from Brexit and the rising cost of imported goods to the widening skills gap and its impact on labour cost inflation.’