New tax burdens introduced in the latest budget could tip even more businesses into financial distress, an insolvency expert from Shakespeare Martineau has warned.
The caution comes after analysis by the full-service law firm revealed that 1,445 companies filed for administration in the first 10 months of 2024 alone. According to data from The Gazette Official Public Record, the number of filings has surged by 37% since 2022.
A significant portion of cases has affected high-employment sectors, with retail, manufacturing, construction, hospitality and real estate being among the hardest hit, collectively accounting for 56% of all administrations.
Delivering Labour’s first budget in 14 years, chancellor Rachel Reeves announced significant changes to employer national insurance contributions. Under the new rules, employers will pay 15% on worker earnings, up from 13.8%, with the base threshold lowered from £9,100 to £5,000.
In tandem with the national living wage increase to £12.21 an hour, these changes are set to drive up labour costs significantly for businesses already grappling with inflationary pressures, high interest rates and a consumer spending slump.
Andy Taylor, partner and head of restructuring at Shakespeare Martineau, said, “This was a tough budget for UK businesses to swallow.
“Many companies are already operating on razor-thin margins, and the increased national insurance contributions, combined with a lower base threshold, will strain cash flows even further. Businesses in high-labour and supply chain-intensive sectors, in particular, could struggle to absorb these costs.
“Without targeted support, many businesses may be unable to weather the compounding pressures, which could lead them to cut costs, lay off employees or close their doors entirely.
“With the potential for further business failures, it is vital companies proactively assess their financial health and develop strategies to manage the upcoming changes.
“Our advice remains consistent – seeking professional advice early can open up more options for struggling businesses. Taking a proactive approach now can help companies navigate these challenging conditions and, ultimately, increase their chances of survival.”
