How are businesses in the U.K. faring as Brexit looms? Not well, if a boom in insolvency and restructuring advice and the level of unpaid tax bills are any guide.
Members of the trade body R3, which represents restructuring advisors, are anecdotally reporting increasing demand for help and advice from businesses and individuals, according to Stuart Frith, president of the group. These pressures are likely to continue as Theresa May tries to find a Brexit compromise that can get through the British Parliament.
“Brexit will be an unknown factor this year,” Frith said in an email to Bloomberg. “Uncertainty around the shape of the final exit deal and future EU-U.K. trading relationship is already forcing businesses to put off decision-making, which has a domino effect on suppliers and customers waiting for those key decisions to be made.”
Meanwhile, U.K. businesses owed the country’s tax authority 5 billion pounds ($6.5 billion) in overdue VAT and corporation tax bills last financial year, an increase of 14 percent from a year earlier, according to Funding Options Ltd., citing data from the government tax agency. Some businesses are delaying their tax obligations in order to fund day-to-day operations instead, the financial technology company said in November. Online retail and restaurants are among the biggest industries that failed to pay U.K. taxes, accounting firm UHY Hacker Young said in October.
British businesses are likely to see further tax pressure going forward. U.K. Chancellor of the Exchequer Philip Hammond promised an end to austerity in his October budget statement to lawmakers, which also included announcements about a new digital tax and a change in tax authority HMRC’s creditor status in corporate insolvencies. The government is seeking to increase its tax revenue to help offset the costs of ending austerity, according to R3.
