More companies will go bust because of the Budget, bankruptcy experts have warned.
As concern over the Chancellor’s tax raid on business showed no sign of easing, the boss of
corporate restructuring specialist Begbies Traynor said the extra costs facing firms will lead to a prolonged period of ‘elevated insolvency levels’.
Backlash: Prime minister Keir Starmer and Chancellor Rachel Reeves are coming under increasing criticism over their so-called ‘jobs tax’
Ric Traynor also warned that the prospect of higher interest rates – in part due to measures unveiled by Rachel Reeves in the Budget – represents another ‘headwind’ facing private enterprise.
The comments came as experts said the Chancellor’s decision to raise National Insurance paid by employers – a so-called ‘jobs tax’ that breached the Labour Party manifesto – would hit hiring.
A report by data analysts S&P Global showed worries over jobs are denting consumer confidence.
‘Job security is showing signs of waning,’ said Chris Williamson, chief business economist at S&P Global.
‘Any intensification of job worries – spurred, perhaps, by the recent measures announced in the Budget – could result in a further loss of consumer confidence. This would likely in turn hit consumer spending and economic growth.’
The Chancellor announced £40billion of tax hikes in her Budget last month with the £25billion National Insurance raid the biggest single increase.
This will see the levy paid by employers on staff wages rise from 13.8 per cent to 15pc and the threshold at which it kicks in cut from £9,100 to £5,000.
The National Insurance hike –which Labour ruled out before the election – came alongside an inflation-busting rise in the minimum wage and a package of workers’ rights that will cost businesses £5billion a year.
Companies have warned that the package could result in job losses, less hiring and lower wages as they struggle to absorb the additional cost.
Meanwhile, the Bank of England this month said the Budget would lead to higher inflation, setting the scene for interest rates to be cut more slowly than previously forecast.
Traynor, one of the country’s go-to corporate recovery experts, said: ‘Additional headwinds for UK business from increased employment costs and the prospect of higher-for-longer interest rates are likely to extend the period of elevated insolvency levels, increasing the need for advice and support from our insolvency and business recovery professionals.’
Begbies Traynor admitted it would not escape the consequence of the tax hikes, flagging that its costs would rise by £1.25million per year. It also reported a 16 per cent rise in half-year profits.
But broker Shore Capital predicted the increased costs would weigh on the business, trimming their profit growth forecasts by 5 per cent for 2026 and 2027.
Begbies Traynor shares gained 1.9 per cent, or 1.8p, to 95.4p. The Mail on Sunday revealed last weekend that the UK’s top ten employers, which include supermarkets as well as delivery giants Royal Mail and Amazon UK, are collectively facing a £1billion tax hike as a result of the planned increase in National Insurance Contributions.
Neil Carberry, head of the Recruitment and Employment Confederation, said the changes to National Insurance were ‘a big concern’ that would discourage businesses from hiring part-time and lower-paid workers.
‘Some of these policies are putting headwinds in businesses’ way to creating jobs,’ he told the BBC’s Today programme.
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