31st July 2025
Businesses may be approaching a crisis period as the increased national minimum wage and the rise in National Insurance employer contributions start to have an impact, according to insights from the insolvency and restructuring sector.
While many companies will have accommodated the rising cost of doing business, our experience is that some are simply hoping for the best.
One of the main areas of concern is the struggling hospitality sector.
While the good summer will be helping many bars and restaurants, the increased monthly cost of higher wages and National Insurance contributions are inevitably going to have an impact.
Add in a HMRC payment and it might become a case of who do people pay first, with HMRC less patient than they have been since Covid.
The main concern is that some businesses will simply kick the problem further down the road – but that’s not a solution, it’s simply putting off the inevitable.
The issue has been exacerbated because many in the hospitality sector are reluctant to pass on increased running costs to customers.
People’s habits have changed since the pandemic, fewer people are eating out and increased costs as the result of minimum wage and National Insurance increases are not helping bars and restaurants already struggling to survive.
When something isn’t a necessity, people make a choice of whether to buy or not to buy and too often they are going for the latter option, especially when they see the final bill rising again.
Hospitality is particularly affected because it is such a staff-intensive sector and the concern has to be that, no matter how much juggling you do with the figures, there comes a point where things have to add up – and that’s where the shortfall appears.
It is strongly advised that businesses avoid short-term fixes for long-term problems.
It is so easy to be tempted by what is basically the equivalent of the personal payday loan but, just as in a domestic situation, the cost is high and will just increase costs in the long term.
Earlier professional advice can help assess if funding is the solution and affordable.
When faced with cashflow issues, choosing the wrong funding solution can be damaging. The right advice can help assess whether a solution is viable in the long term.
Leonard Curtis’ funding team, working alongside insolvency directors, can support business owners and directors in assessing whether their business model is working and its future viability.
There is access to money but it is too tempting to sign up to deals that people cannot afford, especially when a temporary solution becomes an extended one and interest payments begin to take a hold.
Instead, what owners should be doing is asking themselves if their business model is still working and if it can continue to work in the future.
It can never be stated too clearly that the only way to find a practical solution is to act as soon as the problem becomes apparent.
In the current climate especially, hoping for the best simply isn’t going to be an option.