'Perfect storm' for UK businesses brewing in 2025, says Shakespeare Martineau partner

More businesses last year in the South West and the West Midlands filed for administration as the UK faces a "perfect storm" this year, which threatens to push more toward financial difficulty.
Law firm Shakespeare Martineau has carried out the analysis, which showed South West businesses accounted for 6% - the eighth highest region in the UK, while the West Midlands accounted for 9% - the sixth highest region in the UK.
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The analysis showed 1,718 UK businesses, 106 of which came from the South West, filed for administration last year - marking a 28% and 5% increase compared to 2022 and 2023 respectively. In the West Midlands, 149 firms filed for administration last year- also up on previous years.
Regionally, Greater London led the way with 23% of the filings, followed by the North West (14%) and the South East (11%), data from The Gazette Official Public Record revealed.
Andy Taylor, partner and head of restructuring at Shakespeare Martineau, commented on 2025: "Prolonged periods of difficult trading, exacerbated by geopolitical tensions and the impact of new tax burdens introduced in the latest budget, will intensify the pressures many businesses are already grappling with.
"The increase in national insurance contributions, coupled with the lower threshold for payments, will stretch cash flows for companies that are already operating on razor-thin margins."
Retail, construction, hospitality, manufacturing and real estate were the worst-hit sectors for the second year in a row, collectively accounting for 55% of the total administrations.
"Labour-intensive sectors, such as retail, hospitality and construction are particularly vulnerable as they often struggle to absorb rising overheads and additional costs," continued Taylor.
"In addition to these financial pressures, many businesses are still dealing with the aftermath of the pandemic, inflationary costs and supply chain disruptions, which have left them more fragile and less able to weather the storm.
“As we saw in 2024, sectors like retail, hospitality and manufacturing were hit hardest, and there is a real risk that without targeted support, more businesses will be forced to make difficult decisions, including cost-cutting measures, layoffs or even closure."
Taylor said it was "crucial" that businesses do not bury their heads in the sand and ignore the signs of distress.
"Proactively assessing financial health, engaging with advisors early and taking steps to mitigate risks will be vital in navigating these turbulent times." he said.
"Our advice remains consistent: seeking professional advice as soon as financial challenges become apparent opens up more options and can dramatically increase the chances of survival in what will likely be another tough year ahead."