More companies will go bankrupt after budget tax increases

Britain is facing a wave of insolvencies as businesses are hit by higher taxes and rising costs, along with a prolonged period of high interest rates in the wake of the Budget.

In the latest blow to Rachel Reeves, corporate bankruptcy experts warned that the number of companies going bankrupt would increase this winter and over the next year.

Gordon Thomson, of accountancy firm RSM UK, warned of “a wave of distress” among businesses following the Chancellor’s rise in national insurance and the minimum wage rise.

John Cullen, insolvency partner at Accountants Menzies, added: “It would be unrealistic to think that corporate insolvencies will increase over the course of 2025.”

The CBI will warn today that tax rises in the Budget will hit corporate profits, damaging the UK economy in the process.

CBI chief Rain Newton-Smith will say in a speech: “When profits are achieved, competitiveness is achieved, investment is achieved, growth is achieved.”

The Chancellor is facing an ongoing backlash over her budget and, in particular, the £25bn increase in national insurance paid for by employers.

Bank of England Governor Andrew Bailey also warned that interest rate cuts will have to be “gradual”, extending the period of high borrowing costs for businesses.

Insolvency experts now warn that this will lead to a wave of business bankruptcies. Ric Traynor, head of restructuring group Begbies Traynor, told the Mail that many companies will “throw in the towel” in the New Year rather than press ahead, only to be hit by a bumper tax rise in April.

Insolvencies reached a post-Covid peak of 2,293 in October 2023, but fell 24 per cent to 1,747 last month, crucially ahead of the Budget.

But these numbers will reverse as budget measures come into effect.

David Hudson, restructuring advisory partner at FRP, said: “Changes to national insurance will only increase costs for those businesses under pressure, which may well be a factor in more businesses failing.”

Mark Ford, of wealth manager Evelyn Partners, warned that many companies will “fight for their survival” due to rising wages.