The number of real estate and property services companies experiencing financial distress has increased significantly, according to new research from financial and real estate advisory group BTG.
BTG’s Red Flag Alert Index, which monitors the financial health of UK businesses, recorded 7,641 businesses within the real estate and property services sector in ‘critical’ financial distress during the second quarter of 2026, representing a 6.8% year-on-year increase.
The number of businesses in ‘significant’ financial distress reached 88,855, marking a 9% annual increase compared to the same quarter in 2025.
Sector rankings
Of the 22 sectors monitored by the Red Flag Alert, real estate and property services recorded the second highest number of businesses in ‘critical’ financial distress and the third highest number in ‘significant’ financial distress.
Estate agents specifically saw a sharper deterioration, with firms in ‘critical’ financial distress rising 11.1% year-on-year to 411. However, the number of agents in ‘significant’ financial distress fell 5.4% over the same period.
Market pressures
Julie Palmer, Managing Partner at BTG, attributed the difficulties to multiple factors including planning delays, regulatory challenges, and high borrowing costs, which have slowed transactions. Rising employment costs and economic uncertainty have compounded pressures on estate agents and property management firms.
“We are in an environment where the longer companies or developments are left exposed to the market forces, the more we are seeing firms or schemes become insolvent,” Palmer said.
The findings come as the property sector faces broader challenges, with some property services firms reporting transaction declines despite revenue growth. The distress levels also contrast with recent positive indicators in other areas, such as property auction sales rising across most UK regions.
Policy considerations
Palmer suggested that businesses addressing financial distress early may have more options for recovery, whilst larger groups could potentially acquire distressed firms as part of growth strategies.
She noted that real estate businesses are looking to government support in upcoming budgets, with proposals including stamp duty reform to stimulate the market. However, she acknowledged such changes could be “a long and complex process”.
Palmer warned that without improvements in borrowing affordability, housing delivery aligned with demand, and reduced costs for firms, more real estate companies facing distress could close permanently if market stagnation continues.
