Research from insolvency specialist Begbies Traynor has revealed the surge compared to last year with 22,900 construction firms now facing financial difficulties.

Construction was one of the worst-hit sectors as Begbies discovered the number of UK companies in major financial distress rose 14% across all industries as more creditors took legal action to recover debts.

The firm found 161,601 companies have “significant” or “critical” financial difficulties and owe about £55bn to creditors and suppliers.

The research defines companies with “significant” financial difficulties as those with either a court action concerning debt repayments, or average, poor, very poor, insolvent or out-of-date accounts.

Businesses experiencing “critical” distress include those with court orders to repay debts totalling £5,000 or more, or those with compulsory liquidation-related proceedings against them.

Begbies Traynor Executive Chairman Ric Traynor said: “While the economy appears to be showing positive signs of recovery, the magnitude of the liabilities still at risk of default represents a serious risk to creditors. It is this ripple effect which represents a real threat to a sustained economic recovery.”