When the owner of Petersham Nurseries was forced to close two London restaurants and a deli in February, the chain blamed several factors, from rising costs to Brexit, but also Rachel Reeves’ November budget.
Petersham (UK) Limited, which is owned by the Boglione family behind the Petersham Nurseries garden centre in Richmond, will not be alone in feeling the pinch from the UK chancellor’s move to increase the minimum wage and employers’ national insurance contributions from April.
In Europe and elsewhere there are fears of an uptick in corporate distress. And with a trade war looming and economic conditions faltering, many restructuring specialists expect a wave of work as companies struggle with further financial pressures.
“It’s been amazing — given the geopolitical stuff, interest rate rises — that we haven’t actually seen more shakeout in the restructuring market so far,” says Richard Fleming, a managing director of Alvarez & Marsal in London, who leads the consultancy’s restructuring practice in Europe.
“We’ve all been waiting for when all of these things add up to a different degree of activity. Now we’re really starting to see this move into the mainstream market, ” he adds.
Last year, corporate insolvency numbers declined by about 5 per cent compared with 2023 in the UK but are still well above pre-pandemic levels, while personal insolvencies in 2024 rose 14 per cent on 2023.
Ric Traynor, executive chair of restructuring firm Begbies Traynor, says 2025 could end up being a “watershed moment, where thousands of UK businesses ‘call time’ after struggling to survive for years”.
This year started badly for many companies after a tough Christmas trading period.
Tim Cooper, president of R3, the UK’s insolvency and restructuring trade body, and a partner at law firm Addleshaw Goddard, says corporate insolvency levels in January were the highest in more than five years in the UK.
Years of challenging trading conditions and anticipation of the rise in minimum wage and employers’ national insurance contributions could be to blame, he says. And creditors have “now largely abandoned the benign attitude they had in the aftermath of the pandemic as they attempt to manage their own debts”.
Kroll, the risk and financial advisory services provider, points to an increase in administrations in 2024 to 1,330, from 1,259 in 2023.
Manufacturing was most affected, with a 20 per cent increase year-on-year, followed by construction — two sectors with often thin margins and quickly hit by higher energy costs, access to finance and immigration issues.
Recruitment businesses also saw a jump in administrations, reflecting uncertainty in the jobs market, while the media and tech sectors were hit by declining advertising revenues.
Sarah Rayment, global co-head of restructuring at Kroll, says the firm’s transaction, valuation and M&A teams have been “working flat out”.
“Higher borrowing and operating costs, magnified by geopolitical risk, are causing businesses to re-evaluate their strategies and opportunities to recapitalise,” she adds.
These companies are seeking to refinance and restructure their operations, often looking to private equity groups for new investment. But while bigger companies can afford access to restructuring experts, smaller groups face the risk of collapse.
David Fleming, a managing director at restructuring practice KR8 Advisory, predicts fewer insolvencies, but “a lot of financial restructuring”, particularly in sectors where too many smaller companies have taken on higher levels of debt.
More stories from this report
Many companies managed to refinance debts before and during the pandemic at low interest rates, but the cost of borrowing has gone up.
According to consultancy Begbies Traynor, the number of businesses in the UK entering “critical” financial distress rose by 50.2 per cent to 46,853 companies in the final quarter of 2024, up from 31,201 in the previous quarter, especially among those linked to consumer industries.
Julie Palmer, a partner at the firm, notes an “unprecedented level of growth” in the number of companies at serious risk of insolvency, which she attributes to “volatile” consumer confidence, high borrowing costs and the tax and minimum wage increases.
Politics is also creating uncertainty. If Trump’s goal is to “repatriate wealth to the US”, Fleming says, it means “everyone else is a net loser”, including Europe and the UK unless they have the economic power to fight back or to divert trade elsewhere, he adds. “There’s not a lot to suggest that the European economy and political leadership are going to be able to make that happen.”
