Begbies Traynor, one of Britain’s leading corporate restructuring firms, expects a rise in the number of companies in financial distress in the coming months as a result of recent budget changes.
The company expects that the Chancellor’s decision to increase employers’ national insurance contributions will increase cost pressures on businesses already struggling with economic headwinds.
Although the increased National Insurance Begbies will cost Traynor around £1.25 million a year, the company believes it can ultimately benefit from increased demand for its insolvency and restructuring services. Executive Chairman Ric Traynor said: “Additional headwinds for the UK business community due to higher labor costs and the prospect of higher interest rates are likely to extend the period of high insolvency levels, increasing the need for advice and support from our insolvency and business recovery professionals. .”
Begbies Traynor employs around 1,000 staff in the UK and is best known for its expertise in insolvency, but also offers a range of professional services including accounting, surveying, banking and legal advice. The company helps companies with forensic accounting investigations, commercial real estate valuations and corporate restructurings.
During the pandemic, government support schemes kept many struggling businesses afloat, resulting in a slower period for insolvency and administration cases. However, over the past eighteen months, Begbies Traynor’s workload has increased sharply due to rising interest rates and a cooling global economy. Notable administrations the company has handled in the past year include rugby club Worcester Warriors and stationery retailer Paperchase. It also managed the receivership of Britishvolt’s electric battery factory in Northumberland.
To meet increasing demand, Begbies Traynor has expanded its team of insolvency specialists. In the first half of the current financial year, from May to October, the company’s turnover and pre-tax profits increased by 16% compared to the same period last year, to around £77 million and £11.5 million respectively. Traynor noted that the six months were a ‘very good start’, with growth driven by ‘positive momentum across the group’.
The board expressed confidence in meeting market expectations for the full year, with analysts predicting adjusted pre-tax profits of around £23.7 million. This would mark the eleventh consecutive year of earnings growth for the company.
Sector analysts are also optimistic. Jamie Murray of Shore Capital commented: “Foreclosures are at elevated levels compared to the zero interest rate environment before the Covid-19 crisis. We expect this to last longer given the impact the Budget will have on UK businesses. This should be beneficial for Begbies’ business recovery and advisory activities.”
However, Murray has revised down its profit forecasts for 2026 and 2027 by 5%, citing the extra national insurance premiums the company will have to pay from April next year. On Monday morning, Begbies Traynor shares fell 0.6% to 93p, valuing the company at £150m.