ICSM Business Membership Group: insolvencies up as construction, retail and hospitality see rise in liquidations as the budget gets the blame
By Harry Mottram: Blame it on the cost-of-living crisis, the autumn budget, a bad Brexit deal, inflation or huge hikes in energy prices but British business in 2024 saw a rise in the numbers of firms in trouble. Just to take one sector – that of construction - and the number of firms that collapsed last year was 4,208 representing 17% of liquidations, administrations and CVAs across England and Wales as reported by Insolvency Insider. Retail and wholesale saw 3,710 insolvencies which together with construction represented a third of all UK liquidations.
One firm that never even opened their doors to the public after 14 years of planning collapsed at the end of last year owing at least £13 million pounds. London Resort was set to be Europe’s biggest theme park on the outskirts of the capital but was ordered to be wound up by the High Court as creditors demanded their money back. The writing was on the wall for the Swanscombe Peninsula development writes Tom Lowe of Building when the holding company went into administration in 2023 and its main backer, Kuwaiti businessman Abdulla al-Humaidi, declared bankruptcy.
Hospitality also has its problems with RSM reporting that there was a 29% increase in insolvencies in November year on year. Saxon Moseley, partner and head of leisure and hospitality at leading audit, tax and consulting firm RSM UK, said: “As the first month of insolvency data since Rachel Reeves’s Budget in October, the month-on-month rise in insolvencies in November could be an early warning sign of what’s to come for the hospitality industry. The tax rises set to hit operators from April are likely to be the final straw for some.
“The lowering of the threshold for employers’ National Insurance contributions (NIC) is particularly damaging for the sector, given its reliance on part-time and casual workers. The unintended consequence could be that employers focus on utilising their existing workforce and full-time workers instead, putting younger individuals or those with caring responsibilities at a disadvantage.”
The Autumn budget has been blamed by some on the rise in retail collapses reports City AM. Their journalist reported: “According to data from insolvency firm Begbies Traynor, the number of UK retailers facing financial troubles surged to 2,124 for the fourth quarter of 2024, up from 1,696 in the previous three months.”
Ian Carrotte of ICSM said in a recent newsletter to members of the group: “At ICSM we and our members have our collective ears to the ground when it comes to firms not paying their bills or are rumoured to be considering going into administration. And this year there has been a rise already year on year of the news nobody wants to hear that a client who owes them money is likely to go bust. The first sign is late payment accompanied by the usual excuses. ICSM’s advice is don’t grant extra credit time for clients to pay as you are giving them a free loan which they may default on if they go bust.”
Although the Chancellor’s Autumn budget has been widely criticised the problems that lay behind the decision to raise tax lie further back than July 2024. The upside is the Chancellor has talked up the Government’s plans for growth hinting at doing away with some planning red tape to speed up construction and even the possibility of a third runway for Heathrow. If some of those abandoned upgrades to motorways, bypasses and dualling single lane main roads along with the plans for HS2 to go further north then perhaps the economy could see growth this decade.
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ICSM, The Exchange, Express Park, Bristol Road, Bridgwater, Somerset TA6 4RR. Tel: 0844 854 1850. www.icsmcredit.com. Ian.carrotte@icsmcredit.com
