The number of London companies falling into administration soared 37% last year, with key sectors such as property, hospitality and retail particularly hard hit, new figures show.
The 364 corporate failures in the capital last year accounted for 22% of the 1641 national total, according to data from law firm Shakespeare Martineau. The UK number was a 22% jump from 2022 and 91% up on 2021.
The surge suggests many weakened companies that survived the pandemic and the energy price spike are finally being forced to throw in the towel under the weight of a cocktail of pressures.
The worrying figures come ahead of the Bank of England making its decision on interest rates on Thursday.
There is unlikely to be any comfort for firms struggling with high debt burdens as the Bank is thought almost certain to leave its key rate at 5.25%, with a cut not on the cards until May or June.
Further cost headwinds for businesses this year include the 9.8% rise in the minimum wage coming into effect on April 1. London businesses in key sectors such as hospitality and retail that are not eligible for relief are also unhappy that their business rates bills are likely to go up sharply in April.
In addition, the latest round of rail strikes and overtime bans will hit key London commuter services with an inevitable knock-on effect for sectors dependent on workers coming into the centre of the capital.
Andy Taylor, partner and head of restructuring at Shakespeare Martineau, said the significant uptick in UK administrations “underscores the challenges faced by businesses amid changing consumer habits, financial pressures, and geopolitical uncertainties”.
He added: “In the labyrinth of economic complexities, the retail sector in particular is bearing the brunt. There has also been a reduction in housebuilding, which has a knock-on effect in the construction and real estate sectors.”
In retail 239 groups filed for administration compared with 138. Among high profile names were Wilko and Paperchase.
Retailers have faced successive waves of disruption
Richard Lim, who leads Retail Economics said: “Retailers have faced successive waves of disruption and there are no surprises that administrations have risen. Throughout the cost of living crisis, consumers have embraced recessionary behaviours, cutting back their spending, trading down and shopping around more.
“Against this backdrop, retailers’ profit margins have come under enormous pressure and many businesses have been pushed to breaking point.”
In the hospitality industry, 190 firms filed for administration, a jump from 140, during a period when rising energy and food costs bit.
Meanwhile real estate had 155, up from 95 administrations. Melanie Leech, chief executive of the British Property Federation, said: “In common with most sectors 2023 was a challenging year for real estate and construction through a combination of higher interest rates, cost pressures and the aftermath of the 2022 mini Budget impacting on investor confidence.”
Leech said the BPF has today published a vision for partnership with the next Government, “Building for Growth”, and she said “we are confident that with the right framework the sector can rebuild through 2024”.
Among measures the organisation is calling for is better resourcing of the planning system and for business rates to be set at a fair and sustainable level.
