Company insolvencies in UK hit 30-year high

Business groups are calling on the Chancellor to cut taxes in the Budget after the number of companies going bust hit a 30-year high. In a grim update ahead of Jeremy Hunt’s upcoming fiscal statement, the Insolvency Service said 25,158 companies in England and Wales collapsed in 2023 as higher borrowing costs took their toll.

That was the most since 1993 and came amid warnings that a growing tax burden and rising prices have ‘left businesses on the cliff-edge’. A separate report from Lloyds Bank offers some hope for the New Year, however, with business confidence at the start of 2024 at the highest for two years.

Analysts hailed signs of ‘green shoots of recovery in the housing market’ after mortgage lending rose for a third month in a row. Industry bodies are urging the Chancellor to inject more ‘much needed energy into the economy’ with tax breaks in the spring Budget – despite warnings from the International Monetary Fund against tax cuts.

UK Hospitality chief executive Kate Nicholls said the sector, which includes pubs, restaurants and hotels, is facing ‘relentless cost pressures and an unsustainable tax burden’ that has stymied investment’.

She said: “It is now a case of supporting the sector or losing many businesses for good. It’s clear that endless price rises and an ever-growing tax burden have left businesses on the cliff-edge, and has deterred investment.” The Federation of Small Businesses (FSB) said Hunt should reduce National Insurance (NI) bills for companies to boost employment.

National chairman Martin McTague said: “This approach strikes a powerful balance, warding off a looming surge in unemployment, empowering employers, and injecting much-needed energy into the economy.’ UK Hospitality – which said 6,000 venues closed last year – echoed calls for help with NI and also urged the chancellor to ease the business rate burden. And a lower 12.5pc VAT rate for hospitality, leisure and tourism businesses would be ‘the single greatest catalyst for growth in the sector, the group said.

But while many businesses are struggling, the report by Lloyd’s shows confidence among companies is at its highest point since February 2022. Morale has been boosted by sharp falls in inflation and hopes of cuts to interest rates and taxes.

Hann-Ju Ho, a senior economist at Lloyds, said: “Businesses are feeling more confident following the cautious end to 2023, with this being the strongest start to a year since January 2016. The reduction in inflation, albeit with the recent uptick, and the belief that interest rates may have peaked is likely driving the rise in confidence among companies.” Figures from the Bank of England showed 50,459 mortgages were approved in December. Ashley Webb, an economist at Capital Economics, said the data ‘suggests there are green shoots of a recovery in the housing market and perhaps the wider economy.’ The Government recorded its largest monthly surplus in January, helping borrowing in the year-to-date come in over £9bn below forecasts. According to figures from the Office for National Statistics (ONS), the government banked a surplus of £16.7bn in January.

This was more than double the surplus recorded in 2023 and the highest since records began in 1993, although it was slightly lower than the £18bn surplus expected by the Office for Budget Responsibility (OBR).

January’s tax receipts are always higher than other months, due to receipts from all self- assessed taxes. Receipts from self-assessed taxes hit £21.6bn in January, £2.4bn less than the OBR expected.

The Treasury also put significantly less interest on government debt than expected reflecting the fall in interest rate expectations. Falling interest rate expectations and the closure of the energy support scheme have improved the government’s fiscal position ahead of the Spring Budget.