Real estate was one of the most distressed sectors in 2025, with the number of distressed businesses increasing 22%, according to a new report by the Institute for Turnaround (IFT).

Almost every one of the 21 sectors covered by IFT posted upticks in distress.

IFT chief executive Milly Camley told Property Week: “If we look at real estate and property, there are concentrated factors there: debt affordability, refinancing and real estate being downstream from some sectors that have had problems recently – construction, residential property and retail.”

According to Camley, the IFT is seeing property companies with weak balance sheets, liquidity and borrowing issues, and some that are relying on delaying payments to creditors and suppliers to manage cashflow, which builds up stress.

Real estate had the largest percentage increase in businesses in distress over the year, which was also the case in the IFT’s last report. “For Q2 2025, real estate was the busiest sector for turnaround and restructuring activity for our members. So that’s a combination of operational, financial and refinancing activity as well,” Camley said.

IFT members are seeing issues around incomplete builds, managing incomplete bills, lenders or sponsors needing to fund ongoing development to get their money back. Camley said: “You’ve got issues around the viability of residential schemes and downstream effects from distress in the construction sector.”

Construction, retail and professional services are also among the most distressed sectors. The construction industry’s tight margins, supply issues, material costs, labour challenges and recent changes to health and safety regulations have all had knock-on effects on redesigning schemes.

Alongside real estate, the energy sector also posted high levels of distress, posting an increase of 20% on last year. Unusually, manufacturing, one of the more volatile sectors, was down 3%.

Despite a reduction in insolvencies compared with 2024 figures, the report’s key finding showed that the number of distressed businesses registered across UK regions has shown little to no sign of change since a 10% uptick recorded last year.

Even with the challenges, IFT members have delivered significant positive outcomes for UK businesses throughout 2025, including £2.8bn in added shareholder value generated by independent members and 59,562 jobs safeguarded.