Record number of businesses go bust in West Midlands ahead of 'powder keg' legislation changes

The statistics, published by the Government's Office for National Statistics, show 25,595 businesses closed their doors for the final time in 2024 - more than 10 per cent of the region's 215, 000 enterprises.

The figures were broadly in step with the rest of the country as 257,970 firms went out of business across England, out of the country's 2.4 million companies.

Hardest hit were companies in the professional and technical services sector, closely followed by the construction trade.

The bleak figures were published ahead of next month's planned increases to employer-based National Insurance Contributions and the national living wage, the latter set to rise 6.7 per cent, which have left businesses in the region feeling "downbeat", according to local Chamber of Commerce surveys.

Announcing the budget in October 2024, Chancellor Rachel Reeves said the measures would raise £40 billion in taxation, aimed at tackling what she says was a "challenging inheritance" of £22 billion of 'unfunded' in-year spending pressures and stagnating living standards.

Seperate research by the British Chambers of Commerce published this week showed 82 per cent of companies thought the increases would impact their business, with over half saying the change, due to be intriduced on April 1, would impact recruitment (58 per cent) and prices (54 per cent).

More than a third of firms surveyed suggest investment (36 per cent) and day-to-day operations (30 per cent) will be impacted. Only 18 per cent feel the rise is unlikely to cause any change.

“The clock is ticking down to the National Insurance rise, and firms are already telling us they are sitting on a powder keg of costs," said Alex Veitch, director of policy at the British Chambers of Commerce.

“Most are saying they will have to raise prices and reconsider recruitment plans. That’s unlikely to create an environment that fosters growth, the key priority for government. Ministers need to read the room and recognise the impact this tax hike will have."

Also reflected in the ONS figures were 25,240 new business start-ups in the region as owners of companies who folded dusted themselves down to try again, and first-time entrepreneurs got fledgling businesses off the ground.

Ruth Ross, Shropshire Chamber of Commerce’s chief executive, said the county's businesses were operating under a "fear factor" following the autumn budget, with fewer companies reporting increases in sales. 

“The results of our most recent quarterly survey revealed some of the most downbeat forecasts from small businesses since the pandemic, with fears of job losses and company closures," she said.

“Asked about the November budget’s impact on the local business community, 72 per cent of small businesses described it as negative, and not a single employer felt it was positive.

“The proportion of businesses now seeing taxation as a ‘fear factor’ in the coming months has jumped by a huge 40 per cent, and there has been a 14 per cent fall in the number of SMEs reporting increased sales and profits. Hospitality businesses seem to be bearing the brunt of this.”

Meanwhile the Black Country Chamber of Commerce has announced plans to freeze its membership rates for the next financial year as part of an effort to ease the pressure on smaller firms. 

“At the Black Country Chamber of Commerce, we fully understand the budgetary pressures that businesses are facing so we will not be increasing membership prices for our existing members for the next financial year," said CEO Sarah Moorhouse.

“At a time when companies are looking to manage costs, we will support our members by holding prices for the next financial year at the current levels.

“After some challenging years, money is understandably still at the forefront of people’s minds so we have taken this measure on the back of the resounding message I have shared since becoming CEO that chamber members should be assured ‘we’ve got your back’.

“We know so many businesses value chamber membership and the opportunities it generates so we look forward to supporting local firms to realise their potential.”