New tax changes introduced in the latest UK budget could further strain businesses already struggling with rising costs, according to an insolvency expert from Shakespeare Martineau.
The sectors most affected by these financial challenges include retail, manufacturing, construction, hospitality, and real estate, which together account for 56% of the administrations. The full impact of these pressures is now compounded by new tax measures announced in Labour’s first budget in 14 years.
Chancellor Rachel Reeves introduced significant changes to employer national insurance contributions, raising the rate from 13.8% to 15% on worker earnings. The base threshold for these payments has also been lowered from £9,100 to £5,000. These changes, alongside an increase in the national living wage to £12.21 per hour, are expected to drive up labour costs for businesses already grappling with inflation, high interest rates, and reduced consumer spending.
Andy Taylor, partner and head of restructuring at Shakespeare Martineau, commented: “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.”
The expert further highlighted that without targeted support, businesses may be forced to cut costs, lay off workers, or even close their doors. “With the potential for further business failures, it is vital companies proactively assess their financial health and develop strategies to manage the upcoming changes,” Taylor advised. He emphasised the importance of early professional advice, which could provide struggling businesses with more options for survival.
The data underscores the severe strain many businesses are facing. Among the sectors hardest hit are retail, with 203 companies filing for administration, and manufacturing, with 171. In hospitality, 144 businesses entered administration, and real estate saw 131 filings.
As economic pressures continue to mount, Taylor’s advice remains consistent: companies need to act now to ensure they can survive the financial challenges ahead, increasing their chances of navigating the tough economic landscape.