There has been a surprise fall in both the month-on-month and year-on-year corporate insolvency numbers ahead of the chancellor’s plans to increase both the national minimum wage and employers’ national insurance contributions from next April.
This is according to the Midlands branch of insolvency and restructuring body R3 and follows latest statistics published by the Insolvency Service which show that corporate insolvencies in England and Wales fell by 10.4% in October compared to the previous month – dropping from 1,950 to 1,747 – and by 23.8% against the same month in the previous year (2,293).
R3 Midlands Chair Stephen Rome, a partner at Penningtons Manches Cooper in the region, said: “The decrease in corporate insolvency numbers may seem surprising, as concerns about potential tax changes in the Budget resulted in high numbers of Members’ Voluntary Liquidations in September and October. Directors of solvent companies chose to wind down their businesses before any changes were announced, which may have skewed this month’s figures.
“The big question for many businesses, however, is how the upcoming changes to employer national insurance contributions and the minimum wage will affect them. Although this will increase costs for all but the smallest businesses, the feedback from the market is that some directors and management teams will look to manage the financial impact by adapting their staff levels or raising their prices.
“Businesses in hospitality, retail and construction are particularly vulnerable to these changes due to high staffing levels and a large proportion of employees on the national minimum wage. Directors of companies in these sectors will need to review all their costs, if they haven’t done so already, and think carefully about how these additional expenses can be absorbed.
“The silver lining here, albeit a thin one, is that we have seen a more positive trading climate recently as interest rates and inflation have fallen and retail, hospitality and construction have seen an improvement in spending, sales or output.
“As we head towards 2025, we urge anyone who is worried about finances to seek advice as soon as they possibly can. Discussions with a qualified advisor at the earliest possible opportunity will provide more options for improving the situation and more time to take a decision about the next step.
“Most R3 members will give prospective clients a free initial consultation so they can learn more about their circumstances and outline any potential solutions for improving them.”
