Insolvencies and restructuring activity are expected to increase in early 2025 as businesses struggle with rising cost pressures, industry experts have warned.
Surging business costs associated with the autumn Budget are predicted to hit sectors such as hospitality particularly hard.
The warning comes as official data revealed a 13% monthly rise in company insolvencies in November, although the figures remained lower than the same period last year, according to the Office for National Statistics.
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.”
Following October’s budget a survey by the British Institute of Innkeeping revealed that that the additional costs of employment and increases in business rates will render 80% of pubs unprofitable, and that as many as 25% of pubs could close in 2025.
The survey also showed that
- 75% of pubs will cut staff hours, and 33% will make staff redundant.
- 40% will reduce opening hours
- 84% of pubs will increase prices to cover the increased costs, with 80% raising prices by at least 10%.
Freddy Khalastchi a Partner at accountancy and advisory specialists Menzies said “We see the different parts of the hospitality and leisure sector having a mixed 2025. For instance, the hotel market seems to be booming with travel rising to the levels seen before Covid and the room rates also continuing to rise, especially in the bigger cities. This has fuelled the valuations of hotels and seems to suggest that the year could see further M&A activity in this industry. On the other hand, the most recent budget has not done any favours for the restaurant and bar trade. With already wafer-thin margins and some businesses only seeing normal trade.”
“3 to 4 days a week because of the desire on the part of employees to work from home more often, the budget changes to National Insurance for corporates mean a further squeeze on profitability, which can only be overcome by businesses becoming more efficient generally and clever in persuading customers to come to their venues in the quiet periods. In addition, operators will need to control staffing and stock holding costs to meet the erratic demand.”
