High levels of restructuring likely to persist in 2025

2024 was a challenging year for businesses. Having built up over time, the cumulative effects of recent economic shocks including Brexit, the COVID-19 pandemic and rising interest rates collectively strained many businesses.

Add in high inflation and increased operational costs, especially energy and it is not surprising that UK business insolvencies are projected to hit a 12-year high by the end of 2024, with over 29,000 companies expected to have failed.

Sectors such as construction, hospitality and retail have been among the hardest hit, accounting for a significant portion of total insolvencies. Many businesses in these sectors have struggled with supply chain disruptions, labour shortages and changing consumer behaviours.

Our restructuring team has therefore been very busy, most notably on a number of successful accelerated business disposals which have saved hundreds of jobs and achieved optimal results for creditors and other stakeholders.

What does 2025 hold?

The signs are that this year will, in many ways, be just as challenging.

The autumn Budget served as an important scene setter, introducing measures aimed at stabilising the economy and supporting public services. This included tax rises of £40 billion to fund the NHS and other public services – with the burden largely falling on businesses.

There are also significant increases in the national minimum wage coming into effect, which will impact many business sectors including retail, leisure, hospitality and agriculture in particular.

Looking ahead, the economic outlook for the UK remains mixed. While there are signs that inflation may ease and interest rates could be cut further in 2025, providing some relief, current levels of business confidence are low.

The broader economic environment also poses challenges: the UK’s GDP growth is expected to have been modest in 2024 and the Budget forecast shows little improvement over the next few years.

We therefore expect insolvency levels to remain significantly above pre-pandemic levels. This will mean that there will be difficult decisions to make for some business leaders and owners – although it will also provide opportunities to well-capitalised companies for distressed business acquisition.

Optimise your restructuring outcomes

Key to optimising restructuring outcomes is identifying problems before they become critical and taking steps to fix them.

So whether you are a lender or a borrower, it pays to take advice on your options at an early stage – the earlier it is done, the more palatable the options are likely to be.

To find out how we can, please get in touch with our restructuring team.