Labour’s tax rises leave struggling firms in ‘dire situation’ as figures reveal unprecedented 50 per cent rise of businesses in ‘critical financial distress’_Nhy
The number of firms on the brink of collapse has surged under Labour.
Rachel Reeves was last night warned that her tax-raising Budget threatens to push many over the edge following an unprecedented 50 per cent rise in businesses in ‘critical financial distress’.
Separate figures yesterday showed private-sector jobs falling in January at the fastest pace since 2009 – excluding the pandemic – in another blow for the beleaguered Chancellor.
Insolvency specialist Begbies Traynor said Labour’s £25billion raid on employers’ National Insurance and a hike in the minimum wage in the Budget could be the ‘last straw’ for many firms struggling with weak consumer confidence and high borrowing costs.
‘For many of these companies, the situation is dire,’ executive chairman Ric Traynor said. ‘This additional burden will almost certainly result in business leaders taking the decision to, at best, reduce headcount or, worse, wind down their operations in the face of insurmountable challenges.
‘I fear 2025 could end up being a watershed moment where thousands of UK businesses call “time” after struggling to survive for years.’
In a ‘Red Flag alert’, the advisory firm revealed 46,853 businesses were at serious risk of collapse in the last three months of 2024, up from 31,201 in the previous quarter. The likes of hotels, leisure firms and retailers have particularly been under pressure, Begbies Traynor said.
Earlier this month, the Signature Group, which runs bars, hotels, restaurants and nightclubs, said companies were simply aiming to ‘survive ’25’.
Rachel Reeves was last night warned that her tax-raising Budget threatens to push many over the edge following an unprecedented 50 per cent rise in businesses in ‘critical financial distress’
Official figures this week showed jobs slumping in December and public-sector borrowing rising by more than expected
The job cuts were blamed on the NI hike as well as a ‘post-Budget slump in business confidence’, according to the purchasing managers’ index compiled by financial firm S&P Global
It adds to the headaches facing Ms Reeves, who travelled to the World Economic Forum in Davos this week to bang the drum for British growth prospects.
Critics point out that while Ms Reeves talks of prioritising growth by sweeping aside political and regulatory objections, it is her Budget that has done the most damage, while the introduction of a series of new workers’ rights is adding to the burden.
Julie Palmer, partner at Begbies Traynor, said: ‘I fear the current situation will undoubtedly push some over the edge. The situation feels very precarious. Sadly, this has only been exacerbated by the tax rises and increase in national minimum wage levied on businesses during the October Budget.’
Tory business spokesman Andrew Griffith said: ‘To stop the wave of businesses in trouble, something’s got to give, whether it is the jobs-killing employment bill, the NI hike, or the anti-growth red tape still spewing out – or ideally all three.’
Official figures this week showed jobs slumping in December and public-sector borrowing rising by more than expected. In another blow, a monthly reading of private-sector activity showed the economy continuing to stagnate at the start of this year and jobs being cut for the fourth month in a row.
The job cuts were blamed on the NI hike as well as a ‘post-Budget slump in business confidence’, according to the purchasing managers’ index compiled by financial firm S&P Global.
Separately, figures from the Confederation of British Industry showed a deepening decline in retail sales in January – extending the high street’s downturn to the fourth month in a row. And businesses expect to see an equally dismal February.
Julian Jessop, at the Institute of Economic Affairs, a free-market think-tank, said: ‘The UK economy made a poor start to 2025. The jump in the number of firms in financial distress in the final quarter of last year could just be the tip of the iceberg.
‘Insolvencies are usually a lagging indicator, so it is even more worrying that they are already taking off before the full impact of the increases in tax and other business costs in the Budget lands in April.’
Yesterday, kitchenware firm Lakeland said it was considering putting itself up for a sale in a bid to secure its future amid a ‘challenging’ environment. The Windermere-based company is thought to have appointed financial advisers to explore the appetite among speculative buyers.
