The number of Lancashire businesses experiencing ‘significant’ financial distress increased by 10.4% year-on-year to 13,151 in Q1 2026 compared to the same period last year according to BTG’s latest Red Flag Alert, which has monitored the financial health of UK companies for over two decades.

According to the financial and real estate advisory group’s research, the county’s rise was above the average for the North West, which saw an 8.6% year-on-year increase in ‘significant’ financial distress (+8.6%, Q1 2026 – 65,721).

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 financial distress across the North West. 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.

This picture of high cost burdens particularly affected Construction firms in Lancashire as the sector which registered the highest number of businesses in ‘significant’ financial distress (+5.8%, Q1 2026 – 1,919). The number of companies could continue to rise as Lancashire construction firms struggle to get share of the work across other areas of the North West as project pipelines in the county begin to dry up. This will be compounded by the soaring cost of materials and labour which looks set to continue as market conditions worsen, in addition to the existing planning and regulatory barriers and skills shortages that have already impacted the industry in Lancashire.

Alongside Construction, Real Estate and Property (+7.2%, Q1 2026 – 1,379) and Support Services (+7.4%, Q1 2026 – 1,754) also saw a high rate of businesses in ‘significant’ financial distress.

The trend was also evident across the North West counties, with Greater Manchester (+11.1%, Q1 2026 – 29,388), Merseyside (+3.8%, Q1 2026 – 6,568), Cheshire (+5%, Q1 2026 – 14,050) and Cumbria (+6.8%, Q1 2026 – 1,771) all registering annual increases in ‘significant’ financial distress.

At a city level, Preston (+2.6%, Q1 2026 – 1,798), Manchester (+6.8%, Q1 2026 – 8,668), Liverpool (+1.4%, Q1 2026 – 4,141), Salford (+5.4%, Q1 2026 – 1,218), Bolton (+8%, Q1 2026 – 1,912), and Chester (+12%, Q1 2026 – 782) all experienced similar increases in ‘significant’ financial distress.

Across the UK, the number of businesses in ‘critical’ financial distress rose by more than a third (36.9%) year-on-year to 62,193 in Q1 2025 compared to the same period the year before, while the number of firms in ‘significant’ financial distress increased by 9.6% annually to 634,867.

Paul Barber, Partner at BTG’s Preston Office, said:

“As we entered 2026, business leaders in Lancashire would have been hoping for some signs of recovery in spending, confidence, investment and growth. Instead, the hand they 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 and spending contracts, it won’t only be the businesses reliant on discretionary spending that will suffer. We have already seen the impact of rising costs, skills shortages and regulation barriers on construction, but this will only worsen if we see more inflation across the supply chain and the demand for construction work wanes. Leaders in the sector will be hoping that the targets for housing and infrastructure will provide the pipeline of work, but if the housing market continues to stagnate as we have seen nationally, that work may not land.

“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 Lancashire 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.”