21 Aug 2026
The latest Red Flag Alert data, released quarterly for over 22 years, shows that Scotland’s businesses have the highest rate of increase in the most serious ‘critical’ instances of financial distress in Q2 2026, when compared to the same period in 2025.
The data, that is analysed by leading independent financial and real estate advisory group BTG, shows that levels rose by 20.6% year-on-year to 2,830 (up from 2,347 a year ago), well ahead of the UK average increase of just 9%.
In total, 16 of the 22 sectors measured saw a rise in levels of critical distress year on year. Most impacted were financial services (+79.2%), wholesale (+63.9%), media (+63.8%) and food & drug retailers (+58.5%).
Less serious instances of ‘significant’ early financial distress, that are also measured in the data every three months, also showed a small increase of 1.7% from Q2 2025 to Q2 2026, slightly ahead of the UK average of 1.0%, although there were some key sectors that showed notably higher levels of increase.
In total, 11 of 21 sectors saw a rise in levels of significant financial distress in Q2 2026 compared with the previous year, the sectors with the most severe increases included printing & packaging (+32.1%), real estate & property services (+16.7%), travel & tourism (+14.9%) and automotive and general retailers (both +7.3%).
Thomas McKay, managing partner for BTG in Scotland, said:
“The fact that Scotland leads the UK in the rate of increase in critical financial distress levels, with a rise of over 20 percent is highly concerning, and suggests that there will be more businesses that face substantial challenges in coming months unless they are able to put safeguards in place to mitigate cash flow problems.
“We’ve again seen year-on-year rises in the most serious instances of distress and that speaks to just how difficult the situation looks for many businesses with rising energy costs, higher wages and the generally higher prices of raw materials.
“The fact that travel and tourism businesses, that are such huge employers in Scotland, are seeing increases in early signs both year-on-year and quarter-on-quarter is also a big concern for the industry as a whole.
“The coming months will be critical for many businesses here, and some management teams will have to make difficult decisions to ensure the long-term survival of their businesses.”
