Restructurings could rise next year as Budget cost rises loom, warn experts

Insolvencies and restructuring could rise further over the start of 2025 as firms face more increased cost pressures, industry experts have warned.

Restructuring bosses have cautioned that impending cost rises linked to the autumn Budget could particularly weigh on the retail, hospitality and care sectors.

It comes after official figures pointed towards an uptick in insolvencies at the end of this year.

DIY and garden retailer Homebase was among firms to collapse into administration in November.

Insolvency practitioners said they have witnessed an increase in inquiries in the run up to the new year.

Nicky Fisher, immediate past president of R3, the UK’s insolvency and restructuring trade body, and a partner at Herron Fisher, said: “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.”

Firms are set to face significant costs increases as a result of increases to National Insurance contributions, the rise in the minimum wage and some other tax rises.

The policies were announced by the Chancellor Rachel Reeves in the autumn Budget in order to support a jump in spending.

Ms Fisher added: “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.

“This could lead to an uptick in restructuring work in the first quarter of this year or a rise in corporate insolvencies between March and June – but at this stage it’s too early to tell which of these outcomes is most likely.”

Meanwhile, Benjamin Wiles, managing director of restructuring at Kroll, said the outlook for next year is “still uncertainty” as increased costs for firms could be partly offset by stronger consumer finances as wages continue to rise.

He said there has been increased recent activity in the construction sector and suggested this could remain elevated into 2025 amid high borrowing costs.

David Kelly, also a partner at PwC, said: “The year ahead is poised to bring fresh challenges, including navigating the implications of the Autumn Budget measures and responding to the evolving actions of clients and suppliers.

“Ongoing resilience is needed across the corporate sector to weather these pressures.”