While there is often a jump at the end of the year of companies in critical financial distress, the report found a sharp increase of 50% from September to December last year, taking the number of businesses in this category to 46,583.

One factor was HMRC becoming more aggressive in recovering overdue taxes owed.

The number of UK businesses considered to be in significant financial distress meanwhile also rose by 3.5% on the quarter to 654,765.

Ric Traynor, executive chairman of Begbies Traynor, said the figures showed it was “clear that many distressed UK businesses are finding it almost impossible to navigate the challenges they face as we start 2025”.

“For many businesses which were already dealing with weak consumer confidence and higher borrowing costs, the increase in National Insurance contributions and the national minimum wage, announced at the last Budget, could be the last straw,” he added.

He said sectors like retail and hospitality could be impacted in particular because they typically “operate on razor-thin margins”.

Business are set to bear the brunt of tax rises coming into effect in April, with hikes in the National Insurance rate and a reduction to the threshold for employers.

Firms have warned the extra costs could impact UK economic growth – the government’s main goal – with employers expecting to have less cash to give pay rises and create new jobs.

Lloyds Bank, the UK’s biggest lender, released research this week suggesting business confidence had “waned further”, with cost rises for firms to slow activity this year.

“I fear 2025 could end up being a watershed moment where thousands of UK businesses ‘call time’ after struggling to survive for years,” Mr Traynor said.

As a result of rising costs, Helen Gorman decided to close her café bar, TwentySix in Cardiff this month.

“The last two years have been really quite stressful trying to run a business,” she told the BBC.

“The industry as a whole is horrific and some of these challenges I don’t think any government really understands, particularly around VAT rates that we pay. The costs just keep going up, be that supplier costs, be that energy costs.”