What does 'going concern' mean in a set of accounts?

Every set of audited accounts goes through the same five steps on going concern before it is signed.

Every set of accounts rests on one assumption: that the company will still be trading next year. On that basis a factory is valued as a working factory and a ten-year loan as a ten-year loan. If the company were about to close, the same factory would be worth what it fetched at a sale, and long-term debts would usually be treated as due straight away.

So before they sign, the directors must decide whether the company can pay its debts as they fall due for at least 12 months from the date they approve the accounts, not from the year end. That is why a set of accounts signed in July 2026 talks about funding into the second half of 2027.

The accounts are prepared as a going concern unless the directors intend to liquidate the company or stop trading, or have no realistic alternative but to do so. That bar is high. Almost every company that is still trading uses the going concern basis, including companies in serious difficulty.

What changes is the warning. If there are events or conditions that may cast significant doubt on the company's ability to keep going, the directors must say so, and the auditor repeats it under its own heading: 'Material uncertainty related to going concern'.

Thames Water Utilities Limited's accounts for the year to 31 March 2026 show turnover of £3,757m and pre-tax profit of £226m, up from a pre-tax loss of £1,647m the year before (p. 104). By the profit and loss account alone, it was a better year.

Going concern is about cash and debt, not profit. At 31 March 2026 the group had borrowings of £18,982m on its balance sheet (p. 105) and liquidity of £1,038m, made up of cash and undrawn facilities (p. 37). The directors' note sets out what they need over the 12 months from signing on 14 July 2026: the last £213m of its committed super senior funding was drawn that day; a further £750m was expected from August 2026, of which £677m was uncommitted; more liquidity would be needed from early December 2026; and its earliest debt maturity falls in March 2027 (p. 107). In all it expects to need further funding of £2.4bn to the end of October 2027 (p. 108).

The directors state that 'there exists a material uncertainty which could crystallise in the very near term which may cast significant doubt' on the company's ability to continue as a going concern (p. 107). The main question is whether it can complete a recapitalisation through a second court-sanctioned restructuring plan, which needs the support of its creditors, a final Ofwat decision after a public consultation and the court's approval. They say Ofwat had not yet launched that consultation when the accounts were signed (p. 107).

They also say what failure would look like: 'a severe but plausible consequence would be a special administration of the Company under the Water Industry Act 1991' (p. 107).

Even so, the accounts are prepared as a going concern. The directors believe it is reasonable to assume that actions can be taken so that the company has adequate resources for the 12 months, and creditors holding more than £13bn (82%) of its Class A debt and more than £1.6bn (73%) of its super senior debt have sent a letter of support (p. 107).

The auditor, PricewaterhouseCoopers LLP, agrees with that basis but repeats the warning. Its report says the opinion 'is not modified', that the directors' use of the going concern basis 'is appropriate', and that the conditions 'indicate the existence of a material uncertainty which may cast significant doubt' about the company's ability to continue as a going concern (p. 97).

Often, yes. Many companies only make sense as part of a larger group, and their directors rely on the group to fund them. The accounts then say so, and the strength of the going concern statement depends on the strength of that support.

Equinox Fitness Holdings UK Limited, which runs three Equinox clubs in London, made a pre-tax loss of £9.3m in 2025 (p. 10) and had net liabilities of £105.7m at 31 December 2025 (p. 11). Its strategic report says 'adequate cash support was available from the wider Parent Group companies, if necessary', and that the director is confident in the wider group's ability to keep funding it (p. 1).

That reliance cuts both ways. The same page says a term loan held by a US group subsidiary falls due within a year of the accounts being signed, no refinancing had been agreed at that date and, 'As a result, material uncertainty exists around the Group's ability to continue as a going concern' (p. 1). The doubt comes from the group, not from the London clubs.

Thames Water's support comes from its lenders, not a parent, and its own accounts spell out how far it goes: 'The letter of support does not create legally enforceable rights but states the relevant creditors' present intentions' (p. 107). That is true of most support letters. When a set of accounts leans on one, look for who gave it, how long it covers and whether it is binding.

No. It means the outcome depends on something the company does not fully control, and the directors and auditor cannot rule out the bad case. It is a warning about the next 12 months or so, not a forecast. Many companies carry one for a year or two and then drop it; some do fail.

Avanti West Coast shows how a profitable business can carry the warning. First Trenitalia West Coast Rail Limited made £12.6m of pre-tax profit in the year to 31 March 2025 (p. 23). Its warning is about its contract, not its cash: the government's policy is to bring train operators into public ownership, and from 18 October 2026 the Department for Transport could end the contract on twelve weeks' notice. If it did, 'it is anticipated that the trading operations would cease' (pp. 6, 28). Since these accounts were signed, the government announced in September 2026 that Avanti West Coast will move into public ownership on 7 March 2027. The auditor's report repeats the material uncertainty and says the opinion is not modified (pp. 19-20).

The opposite also happens: a company can make a loss with no warning at all. McLaren Racing Limited made a pre-tax loss of £43.8m in 2025 (p. 12), yet its directors, after testing a downside that included 'lower than expected performance by the F1 team', are confident it has sufficient funds for at least 12 months from approval, and its accounts carry no material uncertainty (p. 16).

So read the reason, not just the heading. The table shows what the warning is about in other Spark Intel companies whose latest accounts carry one. Each describes the position on the day the accounts were signed; events since then are not in the accounts.

In three places. The directors' report or strategic report usually has a short going concern paragraph. The fuller reasoning is in the accounting policies, the first note to the accounts, under 'Basis of preparation' or 'Going concern'. The independent auditor's report has either a 'Conclusions relating to going concern' section or, when there is a warning, a 'Material uncertainty related to going concern' paragraph near the start.

Search the document for 'material uncertainty'. If it appears in the auditor's report, read the directors' note it points to: that is where the cause, the amounts and the dates are.

Companies that follow the UK Corporate Governance Code, mainly larger main-market listed companies, add a longer-term viability statement in the annual report, usually over three years. Small companies that are exempt from audit still make the going concern judgement, but there is no auditor's report to check it.