The latest Red Flag Alert research from BTG for Q2 2026 has revealed ‘real estate and property services’ is the sector with some of the highest numbers of businesses in both ‘critical’ and ‘significant’ financial distress.
The financial and real estate advisory group’s research, which has monitored the financial health of UK businesses for more than two decades, revealed there were 7,641 businesses within the ‘Real estate and property services’ sector in ‘critical’ financial distress, up 6.8% year-on-year compared to Q2 2025.
The number of businesses from the real estate and property services sector in ‘significant’ financial distress was 88,855, an annual increase of 9.0% compared to the same quarter last year.
Of the 22 sectors monitored by the Red Flag Alert, real estate and property services had the second highest number of businesses in ‘critical’ and the third highest number of businesses in ‘significant’ financial distress.
This persistently high rate of financial distress comes as the UK housing market continues to stall as buyers and sellers hold out on transactions amid economic uncertainty and fluctuating borrowing costs.
The subsectors with the highest number of businesses in ‘significant’ financial distressed were those working in sales, lettings and management of real estate. This includes firms delivering ‘Other letting and operating of own or leased real estate’ (+12.7% YoY, Q2 2026 – 39,220), ‘Management of real estate on a fee or contract basis’ (+13.4% YoY, Q2 2026 – 16,475), ‘Buying and selling of own real estate’ firms (+4.8% YoY, Q2 2026 – 15,346) ‘Residents property management’ (+8.2% YoY, Q2 2026 – 6,882).
Real estate agencies have experienced worsening financial distress, with the number of firms in ‘critical’ financial distress up 11.1% year-on-year (+11.1% YoY, Q2 2026 – 411). While the number of real estate agents in ‘significant’ financial distress fell year-on-year by 5.4%.
Julie Palmer, Managing Partner at BTG, said:
“The landscape for property companies has been particularly difficult of late. Planning delays, regulatory and policy challenges and high costs of borrowing are meaning transactions have slowed dramatically. Add to this rising employment costs and continued uncertainty across the economy and it is no wonder estate agents and property management firms are facing tough times.
“This is having wide reaching impacts on the market, from sales and lettings of existing property to new developments. 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. The earlier businesses address their financial distress or the viability of their schemes and portfolios, the more options they may have at their disposal to recover and survive. For the larger and more resilient groups, there could even be an opportunity to rescue firms and schemes out of distress and steer them back on the right track as part of their growth plans.
“Real estate businesses will be looking to the government for support in its next Budget, not only to alleviate their own costs challenges, but to kickstart the property market. Reforming or removing Stamp Duty has been proposed as means of quickly breathing life into the market from the bottom upwards by thinktanks and the leader of the opposition. Many will be looking to the government for their proposal for tackling Stamp Duty and Council Tax, but in practice this could be a long and complex process.
“If we are to navigate towards recovery in real estate, construction and the wider property market, the focus must fall on making borrowing more affordable and attractive to buyers, delivering housing in line with demand and budgets and bringing costs down for firms so that schemes can remain profitable. If the market remains stagnant for much longer, and uncertainty and low confidence continue to outstay their welcome, we could see more of the real estate firms already facing distress shutting up shop for good.”
Andy Thompson, National Auctions Director of BTG Eddisons, part of BTG, said:
“The real estate landscape has continued to evolve as governments, funding, policy and demand change. Though there have been reports of the market being subdued, there have also been areas where transactions are taking place and the market is moving. We have seen people turning to auctions, such as sellers of properties coming through probate or property owners looking for an exit, who are favouring the speed and security the method can give them to unlock value they need.
“The key for property owners, managers and agents is to act as early as possible to seek advice on their next steps. Intervening as soon as difficulty presents itself stands businesses in the best stead, with more options available to them. The speed and security of sale that auctions can deliver, along with their targeted and large national buying pools, provides a better chance of an exit for sellers. This has also been a popular way for the larger property owners and developers to grow their portfolios as smaller or incidental landlords exit.
“Even estate agents can benefit by partnering with auctions providers as the method can quickly clear the backlog on the books and get the fee income stream flowing again. Unlike the often over six-month waiting time for completion and one in three fall through rate of private treaty, auctions see agents get their fees much quicker and guarantee they come through as contracts are exchanged on the fall of the gavel. What many may not know is they often garner equal if not higher fees in the process than the standard fee. The latest live stream auctions bring offer a wider reaching national buyer pool, which has not only increased the likelihood of sale but also seen competition push value achieved even higher. Working with auction providers to put on bespoke auctions, estate agents can select the suitable properties to take through the route, deliver the best outcome for their clients and start to get their books moving again.”
Matthew Hattersley, Regional Director in Asset Advisory, Restructuring and Recovery at BTG Eddisons, said:
“Financial distress of real estate businesses, construction firms and the properties themselves could be cause for concern for lenders. Without movement in the market and with many developers and investors hold off on making decisions while awaiting more certainty, investments are hanging in the balance and are being left exposed to market forces.
“These ‘zombie’ schemes that are currently in limbo coming onto the market could be an opportunity for new investors who see potential that lies in rescuing these schemes. Particularly if projects are rethought to deliver a scheme more in line with demand, or properties are redeveloped for different uses subject to appropriate consent, life can be breathed back into areas. For lenders, this could both mean protecting already invested funding but also provide the confidence for more funding to be injected that is needed to get schemes over the line.
“Nonetheless, there is a real risk that others could stumble on for much longer, especially if interest rates spike once more and buyers leave the market. This makes it more vital than ever for the market to get moving to see positive impact across real estate and construction.”
