Company insolvencies hit 30-year high
BUSINESS groups are calling on the Chan- cellor to cut taxes in the Budget after the number of companies going bust hit a 30year high.
In a grim update ahead of Jeremy Hunt’s fiscal statement in March, the Insolvency Service said 25,158 firms in England and Wales collapsed last year 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 has 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 rates burden.
And a lower 12.5 pc 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 Lloyds shows confidence among firms 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 firms.’
Figures from the Bank of England showed 50,459 mortgages were approved last month. 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’.