Business news 23 June 2025
Debt crisis deepens as insolvencies rise. Business pessimism, tax, Brexit, trade, retail, insurance, government debt, employment rights, markets, insolvencies & more business news that we thought would interest our members.
James Salmon, Operations Director.
Debt crisis deepens as insolvencies rise
The number of individuals entering insolvency in England and Wales rose by 5% in May compared to the same month last year, totalling 10,014 cases. The Insolvency Service reported that debt relief orders (DROs) remained at record levels, with 3,783 cases recorded in May. The report highlighted that “DRO numbers have been at record high monthly numbers since the abolition of the upfront £90 fee in April 2024.” Additionally, 648 bankruptcies were noted, a 4% increase from May 2024, while company insolvencies surged by 15% to 2,238. The Debt Respite Scheme recorded 7,805 “breathing space” registrations, a 2% rise from the previous year, providing individuals with legal protections from creditors for up to 60 days. The report indicates that households are facing increased financial strain due to rising bills.
Company insolvencies surge as firms struggle
Insolvencies in the UK have reached concerning levels, with 2,074 companies declaring insolvency in May, an increase of 8% from April and 15% from the previous year. The Insolvency Service reported that the rate of insolvency is now one in 189 companies, reflecting the economic pressures businesses face. Tom Russell, president of R3, warned that Chancellor Reeves’ tax hikes could jeopardise many firms, stating: “Many businesses will already have increased prices and cut expenditure to cope with the existing economic challenges.” The construction sector accounted for 17% of insolvencies, while wholesale and retail trade made up 15%. Experts predict a continued rise in insolvencies due to sluggish growth and high borrowing costs.
UK boardrooms increasingly pessimistic
Pessimism is escalating among UK boardroom leaders, with a recent survey by The Chartered Governance Institute UK & Ireland revealing that around 70% anticipate worsening global economic conditions in the coming year. This marks a significant shift from 2024, where only 22.2% expected a downturn. Concerns about UK competitiveness are rising, particularly due to US trade tariffs imposed by President Donald Trump, which include a 10% baseline tariff on most imports. The report highlights that “boardroom decision-making has rarely been more challenging,” with cybersecurity being the top concern for 71% of governance professionals. Peter Swabey, policy and research director at CGI UK & Ireland, noted that confidence in the UK’s economic outlook remains fragile, stressing the need for the Government’s industrial strategy to address these issues to foster long-term investment.
UK loses tax edge to Europe
According to Lubbock Fine, Britain has lost its competitive edge over European nations due to soaring corporate tax rates. HM Revenue and Customs reported that businesses paid £91.5bn in corporation tax in the year leading up to May, marking a 5% increase from the previous year and more than double the £43bn paid a decade ago. The firm warns that this escalating tax burden “threatens the UK’s ability to attract foreign investment as companies look towards countries with more favourable tax regimes.”
Brexit’s £40bn tax hole revealed
Brexit has resulted in a £40bn tax shortfall in the UK, according to the Office for Budget Responsibility (OBR). John Springford, an associate fellow at the Centre for European Reform, noted that the OBR’s estimate of a 4% loss in long-run productivity has been confirmed by declining investment and trade volumes. This productivity loss translates to a significant tax deficit for the exchequer between 2019 and 2024, during which the Government raised taxes by £100bn. Springford stated: “A large chunk of [the tax rises] would not have been necessary if the UK had voted to remain in the EU.” The OBR’s projections suggest that the full impact of Brexit will unfold over 15 years, with a predicted 15% drop in trade volumes compared to remaining in the EU.
Retail sales slump hits high streets
UK high streets have experienced a significant downturn in retail sales, with a 2.7% drop in May, marking the largest decline since December 2023. The Office for National Statistics reported that food store sales fell by 5%, the steepest drop across sectors, largely attributed to Chancellor Reeves’ tax increases. Kris Hamer, director of insight at the British Retail Consortium, noted that the decline in consumer demand comes at a “particularly bad time” as retailers face rising costs. Paul Dales, chief UK economist at Capital Economics, warned that the 2.7% drop indicates a troubling trend, stating: “The burst of economic growth in the first quarter is over.”
Motor claims inflation to keep rising
UK motor claims inflation is projected to stay high, with total payouts reaching a record £11.7bn in 2024, according to EY analysis. Despite a competitive market leading to lower customer rates, the average cost of motor insurance claims is expected to increase by approximately 6% in 2025 and 2026. EY noted that this rise occurs alongside a “significant decline” in claim frequency, attributed to improved vehicle safety and changing motorist behaviours. The UK motor insurance industry had a combined operating ratio of 97% in 2024, indicating profitability, but is expected to face underwriting losses of around 107% by 2026 as claims inflation outpaces rate increases.
Government borrowing jumps in May
The Office for National Statistics (ONS) reported that government borrowing surged to £17.7bn in May, marking the second highest figure for the month on record, only surpassed during the pandemic. The increase, £700m higher than last year, comes despite a boost from national insurance contributions after Chancellor Rachel Reeves increased employer contributions in April. Experts, including Thomas Pugh from RSM UK, predict potential tax increases between £10bn and £20bn may be necessary to address the rising borrowing and spending commitments. Pugh said: “The under-performance of the economy and higher borrowing costs mean the Chancellor may already have lost the £9.9bn of fiscal headroom that she clawed back in March.” Public sector net debt reached £2.87trn, approximately 96.4% of GDP, reflecting levels not seen since the early 1960s.
Brits hand over more than £8bn in two months
HMRC has reported an additional £8.6bn collected from taxpayers over two months, primarily due to increased National Insurance contributions and frozen income tax thresholds. Tax receipts for April and May reached £142.8bn, a rise of over 6% compared to the previous year. Rachel Griffin from Quilter noted: “Despite no new headline tax rises, receipts continue to climb thanks to frozen thresholds and slashed allowances.” The increase in revenue is largely attributed to income tax and National Insurance, with £6.1bn coming from these measures alone. Sarah Coles from Hargreaves Lansdown warned that the freeze on thresholds until 2028 means “there’s yet more tax pain to come,” urging taxpayers to consider ISAs and pensions to alleviate their tax burdens.
Tax investigations soar for high earners
High earners in the UK are facing an increase in tax investigations as HMRC has doubled its revenue from inquiries into wealthy individuals, raising over £1.5bn in 2024. This surge has prompted HMRC to hire an additional 400 compliance officers over the next four years, aiming to generate at least £500m more in tax revenues by 2030. Ian Robotham from Pinsent Masons commented: “HMRC has been set some very hard targets for extra tax collection by the Chancellor,” indicating that a rise in investigations is inevitable. The total amount collected from high earners has increased from £4bn the previous year to £5.2bn, with HMRC believing the wealthiest Britons are avoiding £2.1bn in tax annually.
Businesses warned of employment rights disaster
The Shadow Business Secretary has expressed deep concern over the potential impact of the Employment Rights Bill on the UK economy, warning that British businesses risk “being sleepwalked into disaster.” The bill, currently progressing through parliament, has faced significant criticism from industry leaders who fear it could lead to “serious unintended consequences” and the loss of 50,000 jobs. Key reforms include shorter notice periods for strikes and the establishment of the Fair Work Agency, which Andrew Griffiths argues could lead to costly legal challenges for firms. In an open letter to company bosses, he urged businesses to “speak up” against these changes, which he believes could undermine years of consensus on workers’ rights that have benefited the economy. “This is not good for the economy,” he stated.
British businesses are being urged to oppose Angela Rayner’s Employment Rights Bill, which has been labelled the ‘Unemployment Bill’ due to concerns it may deter hiring. The bill proposes significant changes, including the repeal of trade union laws and the end of zero-hours contracts, which could cost businesses £5bn annually and lead to the loss of 50,000 jobs. Business leaders, including Lord Karan Bilimoria and Luke Johnson, have voiced their fears that the bill will lead to increased strikes and economic decline, with Johnson stating: “Introducing a new swathe of burdensome regulations is, to me, little short of madness.”
HMRC under orders to close tax gap
Chancellor Rachel Reeves is intensifying tax collection efforts by investing £100m into HMRC’s compliance teams, hiring 500 new inspectors, and employing advanced AI tools. The aim is to close the £46.8bn tax gap, but Rachael Griffin from Quilter notes that ordinary taxpayers only account for 10% of the tax gap while small business owners account for 60%. While the focus is on wealthier taxpayers and small firms, ordinary earners should also be vigilant, says Neela Chauhan from UHY Hacker Young, who warns that unannounced visits and aggressive mailshots are likely for those suspected of underpaying.
Non-dom exodus could force Labour into another U-turn
The Observer reports on how recent changes to the taxation of non-domiciled individuals in the UK have led to a significant exodus of wealthy residents, potentially forcing the Chancellor into a U-turn on the rules. A study by Bloomberg revealed that over 4,400 corporate directors have departed since Labour took office, with a 75% increase in departures in April alone. The difference between tweaks made by the Conservatives and more radical changes by Labour – including subjecting non-doms’ foreign assets to IHT – are said to be driving the exodus, with super-rich foreigners now fearing half their fortunes could be lost to the UK Government should they fall off their yacht.
Labour’s industrial strategy includes £275m for skills
Sir Keir Starmer is set to unveil a decade-long industrial strategy aimed at revitalising the UK economy and reducing dependence on foreign workers. The plan includes a £275m investment in skills training for Britons in growth sectors such as defence, engineering, digital, and construction. “Our modern industrial strategy will be powered by investing in British people,” Business Secretary Jonathan Reynolds said. “It will help transform our skills system to end the overreliance on foreign labour, and ensure British workers can secure good, well-paid jobs in the industries of tomorrow and drive growth and investment right across the country.” The Government anticipates that the identified growth sectors will generate 1.1m new jobs by 2035.
Markets
On Friday, the FTSE 100 closed down 0.2% at 8774.65 and the Euro Stoxx 50 closed up 0.7% at 5233.58. Over in the US the S&P 500 fell .022% to 5967.84 and the NASDAQ fell 0.51% to 19447.41.
Pharmaceutical companies fell after President Trump repeated threats to impose tariffs on imported drugs.
BOE Governor Andrew Bailey suggested he is not convinced of the ‘need to create new forms of money’ in reference to the ‘Britcoin’ concept which remains at concept stage.
UK Consumer confidence rose 2 points according to the GfK sentiment survey to -18. the most positive reading since December. Neil Bellamy GfK consumer insights director said confidence remains ‘fragile’.
This morning on currencies, the pound is currently worth $1.3388 and €1.166. On Commodities, Oil (Brent) is at $77.75 & Gold is at $33365. On the stock markets, the FTSE 100 is currently flat at 8773 and the Eurostoxx 50 is down 0.11% at 5225 as investors seem unfazed by the US strike on Iran with markets only slightly down.
Citi said if Iran closed the straight of Hormuz then Brent may hit $90.
JP Morgan turns bullish turn on UK gilts
JP Morgan Asset Management has expressed optimism regarding Britain’s creditworthiness, stating that the cost of servicing UK debt, or gilts, is expected to decrease. The positive outlook comes as Chancellor Rachel Reeves implements strict fiscal rules, making gilts more appealing to lenders. However, Reeves faces significant challenges, including a potential £15bn gap in public finances due to increased health and defence spending. While she has ruled out raising income tax, VAT, and National Insurance rates, she may consider accessing pension funds and extending tax-free earnings limits. Hugh Gimber from JP Morgan noted: “The risk/reward trade-off for UK Government debt appears more attractive relative to many of our counterparts around the world.”
UK and Bahrain seal £2bn deal
Britain has announced a new partnership with Bahrain, involving a £2bn investment aimed at enhancing financial services, clean energy, manufacturing, and technology sectors. Business Minister Jonathan Reynolds commented: “This £2bn commitment is yet another major vote of confidence in the UK economy,” highlighting its significance in the context of the upcoming modern Industrial Strategy.
UK pensioners flock to tax havens
As British pensioners face increasing tax burdens due to Labour’s freeze on income tax thresholds, many are considering relocating to low-tax countries. The Pensions and Lifetime Savings Association (PLSA) states that a single pensioner requires an income of £52,220 annually for a comfortable retirement, pushing them into the 40% tax bracket. However, destinations like Greece, Cyprus, Italy, and the UAE offer attractive tax regimes. Greece provides a flat 7% tax on foreign income for up to 15 years, while Cyprus has a low 5% rate on pension income. Italy offers a similar 7% rate in less populated areas, and the UAE has no income tax at all.
Tax policies squeeze Britain’s middle classes
According to a recent Bank of England report, Rachel Reeves’ tax and wage policies are significantly impacting Britain’s middle classes. The report highlights that changes in the last Budget, including a £26bn payroll tax increase and a 6.7% rise in the National Living Wage, are driving up business costs and leading to reduced pay rises. “The most common response is to reduce pay awards for those above the National Living Wage by 1–2 percentage points,” the report states. This has resulted in a chilling effect on wages and investment, with over 250,000 redundancies reported since the Budget. David Owen, chief economist at Saltmarsh Economics, noted that the report contradicts the belief that minimum wage increases would positively affect income distribution.
Spectris
Spectris has agreed a 3763p cash offer from Advent that will include a 28p interim dividend however KKR has said this morning that it is in the advanced stages of due diligence and is considering making an offer for Spectris itself.
Thames Water error may require restating accounts
The FT reports that Thames Water may be forced to restate its financial accounts for the year ended March 2024, prompting fears of further breaches of the company’s debt covenants. People familiar with the matter said the Financial Reporting Council is aware of the issue. Should one of Thames Water’s senior lenders allege that a breach of debt terms had occurred, Thames could argue that PwC had signed off its accounts and it had acted in good faith. It is not yet clear what error prompted worries about a possible restatement, with Thames Water stating: “We follow all UK-adopted International Accounting Standards and take our regulatory accounting responsibilities seriously.”
The UK government separately, has stepped up contingency planning for Thames Water in recent days. Steve Reed, the Environment Secretary said that ministers were preparing to put Thames Water into a taxpayer backed special administration regime. This has caused Thames Water bonds to decline sharply.
Wirral Council’s debt skyrockets £233m
Wirral Council’s net debt has surged by £233m over six months, primarily due to changes in Public Finance Initiative (PFI) liabilities and accounting rules. The council’s treasury management strategy meeting revealed a £25m increase in PFI spending, £73m in borrowings, and an £8.2m drop in investments. Notably, £152.5m of the debt increase is attributed to new accounting regulations requiring rent costs to be recorded as both an asset and future lease payments
River Island faces tough retail reality
River Island is set to close 33 of its 230 stores as part of a restructuring plan that could jeopardise over 1,000 jobs. The family-owned retailer, which employs around 5,500 people, cited a “migration of shoppers from the high street to online” and rising operational costs as key factors behind its decision. The company, which has brought in PwC to help with the restructuring, reported a £33.2m loss in 2023, with sales dropping by over 19% to £578.1m. As the retail landscape shifts, experts like Matthew Padian predict more retailers may pursue similar restructuring strategies.
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Why you should become a member of CPA!
The Credit Protection Association (CPA) has been assisting thousands of UK businesses to get paid, since 1914. We have supported our members through all sorts of difficult trading environments. With high interest rates and a struggling economy and elevated insolvencies, our services can help your business navigate these difficult waters.
Unlike other credit management and debt collection companies, we offer a range of services to our members that are all included as part of a fixed annual subscription, tailored to your needs.
Under your annual subscription you will have access to our main services:
- Our Creditcare credit reports provide credit ratings and limits along with a host of detailed information on your potential customers to enable you to trade with confidence and set appropriate credit policies for new customers.
- Our monitoring service will alert you to any significant changes in the status of those customers.
- Our Overdue account recovery service can be used to chase up payment on any invoices to those customers that have not been paid on time. Unlike other debt collection companies, this service directs your customer to pay direct to you and allows you to maintain your goodwill with them, rather than inserting ourselves into your relationship with you customer and insisting they pay CPA instead. Our Overdue account recovery service resolves over 80% of accounts referred to us.
All of the above services and other complimentary services such address verification, are included in your subscription!
And for the small minority of debts not resolved through our Overdue account recovery service, you can refer the debt to our collections department to escalate the late payment collections process.
CPA eases cash from tardy debtors – Efficiently, Effectively, Economically and Ethically. And we provide credit information so you can monitor and assess your key customers and be warned of any potential risks. CPA has been improving business cash flow for over 100 years, by tackling late payers and campaigning against the late payment culture in the UK.
Unlike other credit management companies, we offer our members a fixed annual subscription regardless of how high the value of their debts maybe!
Rather than to borrowing more money to improve your cashflow, CPA suggests that business owners tackle the problem at its source. If late payments are a strain on your cashflow, then talk to CPA about how we can help you reduce those late payments.
Just call Peter Uwins, CPA’s National Sales Manager, on 020 8846 0000 (business hours) or email nsm@cpa.co.uk today.
When you see your money come in, you will be so glad you used CPA.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
Do you have a commercial late payer that is causing you grief? Use CPA’s no-win, no-fee, commercial debt recovery service!
If you have a particular business customer who is late paying and causing you sleepless nights, why not offer it to CPA’s collection department for purchase on recourse?
CPA’s collection department will then pursue the debt. We will be liable for any costs incurred and then when we have recovered the debt, we will pay you the net principle debt recovered less our percentage.
Once you have enjoyed that success then you can consider the more cost effective membership which includes our Overdue Account Recovery service and Status/Credit reports as well as a range of other complimentary services.
Just call 020 8846 0000 and ask for Godfrey Nelson or Cris Shirley (business hours) or email debtpurchase@cpa.co.uk today.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.
Get compensated for previous late payments
Have you been paid late by business customers in the last six years?
Maybe you no longer work with them. Under legislation, you are entitled to compensation you for those late payments you have suffered.
You put up with the PAIN – now claim the GAIN!
Claim late payment compensation (LPC) from former business customers who paid you late in the last six years!
CPA (LPC) Recoveries is using our bespoke software and decades of experience to do just that for our clients
Check our compensation calculator to see how much your business could be owed!
Discover NOW the potential value of late payment compensation hidden in your sales ledger!