Budget cost rises could lead to more firms going bust, warn experts
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Industry experts are warning that insolvencies and restructuring may surge in early 2025 as businesses face mounting cost pressures. Restructuring chiefs caution that impending cost increases, announced in the autumn Budget, could severely impact the retail, hospitality, and care sectors. This warning follows a recent uptick in insolvencies, with company insolvencies rising 13% in November compared to the previous month, according to the Office for National Statistics.
Insolvency practitioners report an increase in inquiries from businesses as the new year approaches. Nicky Fisher, immediate past president of R3, the UK's insolvency and restructuring trade body, and a partner at Herron Fisher, stated: "Our members are telling us that inquiries from directors increased in November, as they looked to understand more about their insolvency or restructuring options and discuss their financial concerns ahead of January.
"The December period will either be a lifeline or the tipping point for a number of businesses – especially those in the retail and hospitality sectors, who have had a challenging year of continued rising costs coupled with cautious customer spending.".
Businesses are bracing for a hit to their bottom line as they face hikes in National Insurance contributions, an increase in the minimum wage, and other tax rises. These measures were unveiled by Chancellor Rachel Reeves in the autumn Budget to bolster spending.
Ms Fisher commented: "With the changes to employer National Insurance and National Minimum Wage being introduced in April, the next three months will be critical for firms in these industries and others as they work out how they will manage the impact this additional cost will have on their finances.".
