Greater London businesses accounted for 22% of administrations in the first six months of 2024 – the highest region in the UK, according to analysis by law firm Shakespeare Martineau.
A total of 879 businesses, 191 of which came from Greater London, filed for administration between 1 January and 30 June – marking a 16% increase compared to the same time period in 2023 and 42% rise in comparison to 2022.
Retail, manufacturing, construction, real estate and hospitality were the worst-hit sectors for the second year in a row, accounting for 57% of all administrations.
Regionally, Greater London led the way with 22% of the filings, followed by the North West (17%) and Yorkshire & The Humber (11%), data from The Gazette Official Public Record has revealed.
While administrations are still yet to hit pre-Covid levels (940 in the first six months of 2019), an insolvency and restructuring expert has warned that more businesses will fail unless the next government controls inflation and gets a grip on rising interest rates.
Andy Taylor, partner and head of restructuring at Shakespeare Martineau, said: “The continued increase in the number of businesses filing for administration is indicative of the prolonged economic challenges that are plaguing the country.
“The data highlights the disproportionate impact on the retail, manufacturing, construction, real estate and hospitality industries in particular, which, together, constitute a substantial proportion of all administrations. Changing consumer buying habits means the retail and hospitality sectors are bearing the brunt, and there has also been a reduction in housebuilding, which has a knock-on effect in the construction and real estate sectors.
“The cost of money, marked by high interest rates throughout 2023, exacerbates financial strains on businesses with models that thrived in a sub-2% interest rate environment. Organisations can only bear that pressure for so long before its sustained impact starts to wash through and they begin running out of cash.
“Moreover, HMRC continues to be more active, with threatened enforcement pushing businesses towards considering their options, and many opting for administration as an alternative to being wound up on a compulsory basis.
“The upcoming General Election is likely to have significant implications for the business environment. Political uncertainty can affect market confidence and investment decisions, which impacts business stability. It is essential for businesses to stay informed about potential policy changes and to be prepared for shifts in the economic landscape that may follow the election.”
The retail industry was the worst-hit sector for the second year running, accounting for 14% of all administrations in the first six months of 2024.
Andy said: “The sectors most impacted are feeling the effects of higher interest rates and inflation; the money in people’s pockets is now worth less so they are less likely to purchase luxury items and services, which is impacting the retail and hospitality sectors.
“Consumer spending is shrinking and footfall on the high street and in restaurants is declining as a result. The pressure is also on businesses as they face higher borrowing costs and energy expenses, so they are being squeezed from both sides.
“There is still uncertainty in the geopolitical landscape, which is impacting business confidence. With cash flow becoming tight, businesses are at a greater risk of going under. Supply chain issues and the rising cost of importing goods have created a challenging juggling act for businesses to maintain profitability.”
Greater London and the North West remain the regions where most businesses filed for administration. However, Yorkshire & The Humber has overtaken the South East for third place, which sits in fourth this year. The East of England makes up the rest of the top five in 2024.
Andy said: “Regionally, the high concentration of filings in Greater London, the North West, and Yorkshire & The Humber reflects the broader economic pressures felt across the country. The shift in regional standings further emphasises the evolving nature of economic stress in different areas.
“Our advice remains consistent – seeking professional advice early can open up more options for struggling businesses. It is crucial not to ignore the signs and bury your head on the sand, and, instead, take a proactive approach to address underlying issues. By doing so, businesses can better navigate the tough trading conditions and increase their chances of survival.”