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The number of UK businesses in “critical financial distress” has risen by more than a third over the past year, according to a new report, with bars and restaurants, retailers and construction groups the hardest hit.

According to the “red flag alert” report released on Friday by insolvency specialist Begbies Traynor, 1,957 UK businesses were in critical financial distress in the second quarter of 2022, up 37 per cent from the same quarter last year.

The report said that higher labour, material and energy prices, as well as the withdrawal of government-backed Covid support programmes, were to blame for the increased strain on businesses.

Bars and restaurants, general retailers and construction companies were the most affected, with year-on-year rises of 70 per cent, 48 per cent and 36 per cent respectively, the report found.

“Having emerged from the pandemic, many…

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