More companies are going bankrupt as a result of tax increases in the budget

Britain is facing a wave of bankruptcies as businesses are hit by higher taxes and rising costs, in addition to a prolonged period of high interest rates in the wake of the budget.

In the latest blow to Rachel Reeves, business failure experts warned that the number of companies going bankrupt would rise this winter and next year.

Gordon Thomson, of accountancy firm RSM UK, warned of ‘a wave of unrest’ among the business community following the Chancellor’s national insurance hike and minimum wage increase.

John Cullen, insolvency partner at accountants Menzies, added: ‘It would be unrealistic to think that the number of business failures will only increase over the course of 2025.’

The CBI will today warn that tax rises in the budget will hit corporate profits and hurt the UK economy.

CBI chief Rain Newton-Smith will say in a speech: ‘When it’s about profits, it’s about competitiveness, it’s about investment, it’s about growth.’

The Chancellor is facing an ongoing backlash over her Budget – and in particular the £25 billion increase in national insurance paid by employers.

Bank of England Governor Andrew Bailey has also warned that interest rate cuts will have to be ‘gradual’, extending the period of high borrowing costs for businesses.

Insolvency experts are now warning of a wave of business failures as a result. Ric Traynor, boss of restructuring group Begbies Traynor, told the Mail that many companies will “throw in the towel” in the new year rather than soldier on only to be hit with a huge tax hike in April.

Bankruptcies reached a post-Covid peak of 2,293 in October 2023, but fell 24 per cent to 1,747 last month – crucially ahead of the Budget.

But these numbers are expected to reverse once the fiscal measures come into effect.

David Hudson, restructuring advisory partner at FRP, said: ‘Changes to national insurance will only increase costs for under-stressed businesses, which could well be a factor in more companies going under.’

Mark Ford of asset manager Evelyn Partners warned that many companies will be ‘fighting for their survival’ as a result of rising wage costs.