Insolvency specialist Begbies Traynor has warned that higher wage bills and prospects for fewer interest rate cuts will keep company failures at high levels, as it revealed its own cost hit from the recent Budget.
The group said it is set to face an extra £1.25 million a year from next April after the Chancellor last month announced moves to hike employers’ national insurance contributions.
Begbies said it was “reviewing options to mitigate the impact where possible”.
It said companies across the UK are expected to remain under pressure as a result of soaring staff costs, with insolvency levels set to remain high.
Experts have also reined in their forecasts for interest rate cuts following the Bank of England’s recent prediction of higher inflation, partly as a result of some of the Budget measures, as well as Donald Trump’s victory in the US election.
Businesses have lined up to alert over cost implications of the Chancellor’s decision to increase employers’ national insurance (NI) contributions – hiking the level, while also lowering the threshold at which employers start paying contributions.
It was also announced in the Budget that the minimum wage will rise again next year, sending wage costs surging even further.
Retail groups such as Sainsbury’s, Marks & Spencer and Asda, as well as hospitality and pub firms, have revealed significant cost hikes from the Budget measures.
Ric Traynor, founder and executive chairman of Begbies Traynor Group, said: “Additional headwinds for UK business from increased employment costs and the prospect of higher for longer interest rates are likely to extend the period of elevated insolvency levels, increasing the need for advice and support from our insolvency and business recovery professionals.”
He added that the group had made a “very good start to the year”, with underlying pre-tax profits up by around 16% for the six months to October 31 on revenues also up by about 16%.
The firm added it was “confident” of meeting forecasts for the year to next April.
Analysts are currently predicting underlying pre-tax profits will lift to between £23 million to £24.3 million, up from £22 million for 2023-24.
