Official data from the Insolvency Service shows an 8% increase in companies going bust as they were hit by the Chancellor’s tax rises in April.
In May across England and Wales there was 2,238 company insolvencies which is an 8% rise compared to April and 15% higher compared to the same period in 2024.
There were 1,734 creditor’s involuntary liquidations, 354 compulsory liquidations, 136 company administration and 14 company voluntary arrangements.
In April the Chancellor’s Rachel Reeves new tax increases kicked in with an increase in employer’s national insurance hike and a rise to the minimum wage.
Mark Ford, partner in S&W’s restructuring and recovery team, said, “Businesses are now facing newer challenges that threaten their viability, and this means we are likely to continue to see a steady stream of company insolvencies in the coming months.
“Higher costs resulting from increases to employer national insurance contributions, the minimum wage and business rates are all heaping considerable pressure on businesses, particularly those that feel they are unable to increase prices for fear of losing customers.”
David Kelly, head of insolvency at PwC, said, “The data reflects the persistent challenges, particularly in the construction and manufacturing sectors, and highlights that the financing position of many businesses remains fragile.
“This vulnerability can also be seen in some of the business and consumer sentiment surveys which are painting a very cautious picture.”
Nick O’Reilly, former R3 President and Restructuring and Recovery Director at MHA, the accountancy and advisory firm said, “Insolvencies were up 8% in May from the previous month, as the economic environment continues to offer little promise for UK businesses.
“While economic growth in the UK in the first quarter of the year was positive, this followed a period of stagnation and forecasts for growth for the rest of 2025 are low.
“As the uninspiring economic outlook is keeping consumer confidence low and pushing demand down, businesses are also faced with higher costs due to rising average earnings (including the rise in the minimum wage) and increased National Insurance contributions — this will have an especially adverse effect on sectors with a large number of employees on lower wages like hospitality and retail.
“Many of the companies that failed in 2023 and 2024 were only being kept alive by the hefty support provided by the Government during the pandemic. Despite this, insolvencies were still up 15% from May last year, a worrying sign for businesses as we head into the second half of the year.”
