Top 10 UK economy survival steps for contractor limited companies to take

It will already have been forgotten by some contractors.

But Autumn Budget 2024 in October last year introduced a significant set of costs which is now showing up in the post-mortem of limited company deaths, and these deaths peaked in March 2025, writes Gareth Wilcox of Opus Restructuring.

The UK just notched up an eight-year high in company insolvencies

Indeed, according to figures released by my good friends at Kroll, March 2025 saw a record number of company insolvencies since the advisory’s records began in 2017.

It might sound small to some -- 141 administrations, but that company closure total has increased significantly since March 2024, when 108 incorporated businesses hit the skids.

It’s not all doom and gloom. Right?!

For fuller context, ContractorUK readers should note that the number of UK companies entering insolvency in Q1 2025 was lower than in Q1 2024.

And potentially with a few good reasons.

Inflation has decreased from historic highs over the past year.

A decisive UK general election provided some political stability.

Economic optimism as 2025 began was short-lived

However, the optimism at the launch of 2025 was short-lived due to various economic pressures.

And these are pressures which made themselves known in March 2025. The pressures are currently ongoing, and so warrant contractor limited companies who don’t wish to join March’s eight-year high in company administrations to take 10 steps to help alleviate them or mitigate their impact.

Spring Statement 2025 almost finished what Autumn Budget 2024 started

Before I come to outline the ten steps, why March 2025?

And why Autumn Budget 2024?

Well, if we look at that record number of administrations counted by Kroll, the figures show a significant fall in administrations in the manufacturing and media/technology sectors. While that sounds like good news for IT or computing consultancies, a higher number of company failures happened in key sectors that such consultancies supply -- like healthcare, industrial, and housing.

To those of us specialising in insolvency, it won’t be surprising that the first quarter after a Budget that hiked businesses’ costs has caused administrations to reach a new historical high.

The UK’s economic landscape has shifted significantly. Here’s why

Since the chancellor’s October 30th package, businesses have faced mounting pressures from the costs it introduced.

And while today’s pressure on UK firms is more likely to centre on global tariffs from the US, the autumn Budget was the start of a significant shift in the UK’s economic landscape.

A key blot on that landscape then occurred at Spring Statement 2025.

The chancellor’s March 26th package added to the significant cost increases from the fiscal update just five months previously, making some of those costs an imminent reality. And these impacted UK enterprises at the start of a new financial year (2025-26).

A campaign that failed to convince

The reaction to the chancellor’s two package adding significantly to employment costs has been a campaign, with concerns about business and consumer confidence expressed. 

However, the government continues NOT to show any sign of changing course. Perhaps it’s steadfastness here is unsurprising given the fiscal gap that it is seeking to bridge.

Five facts signal the UK's fiscal fundamentals to not be unfavourable

Some businesses like contractor companies may be able to extract some relief from the following five financial facts:

1. GDP growth of 0.5% in Q1 2025.
2. Unemployment settled at 4.4% between Dec 2024 and Feb 2025.
3. UK goods exports to the USA are subject to ‘just’ a 10% tariff (N.B. There were fears that the tariff would be more swingeing than 10%, but higher rates have already been set for the UK on aluminium, steel, and automotive products).
4. Interest rate cut by the Bank of England to 4.25% in May 2025.
5. Inflation falling (despite it now being expected to rise again due to various cost pressures).

Chancellor’s measures still probably haven’t come home to roost

My concern is that, while Kroll’s insolvency statistics show a rise in company failures, the full impact of the chancellor’s measures in October and March may not be felt until later in 2025. 

It should be factored into your business decisions and contingency planning that distress in ANY supply chain has a knock-on effect. 

Indeed, the Kroll stats indicate that an increasing number of SMEs could be at significant risk of insolvency.

Distress signs

But it’s not just in my immediate circle of insolvency where turbulence continues to have a ripple effect.

There’s been increased demand in Q1 2025 for professional services. And more and more businesses are exploring various strategies to cope with cost increases, including hikes to fees, staffing reductions, and mergers. 

We would advocate that early and independent expert advice is crucial for businesses facing financial challenges.

But what about contractor companies in particular?  

Top 10 UK economy survival steps for contractor limited companies to take

Given the challenging economic environment, we recommend that contractors adopt strategic measures to navigate the uncertainties and mitigate the risks.  While some of the below ten steps may seem obvious, it is important to retain a laser-like focus in turbulent times.

1. Diversify Client Base: Contractors should aim to diversify their offering and client base to reduce dependency on a single sector or client. This can help mitigate the impact of sector-specific downturns.
2. Strengthen Financial Management: Effective financial management is crucial. Contractors should closely monitor cash flow, manage debts, and maintain a healthy balance sheet, using up-to-date financial management software to track expenses, revenue, outgoings and profitability accurately.
3. Adapt to Market Changes: Stay informed about market trends and be ready to adapt. This could involve upskilling, adopting new technologies, or shifting focus to more resilient sectors.
4. Cost Management: Implement stringent cost management practices. Review all expenses and identify areas where costs can be reduced without compromising quality.
5. Explore Funding Options: Look into any funding options such as government grants, loans, or investment opportunities to provide a buffer during tough times.
6. Build Strong Relationships: Maintain strong relationships with clients, suppliers, and any other stakeholders. Good relationships can be key to ensuring invoices are paid on time. They can also enable additional business opportunities or collaborations, providing support during challenging periods.
7. Risk Management: Develop a robust risk management strategy. Identify potential risks and have contingency plans in place. This includes having insurance coverage (personal and business) for various risks.
8. Focus on Quality and Reliability: Ensure that the quality of your consultancy’s work delivered remains high and that deadlines are met.
9. Stay Informed: Keep abreast of economic developments, digest policy changes, and read impartial industry news and reliable guides. Being well-informed will always assist in making timely and informed decisions.
10. Seek Early Advice: If facing financial difficulties, seek early advice from financial experts or business advisors. Early intervention can provide more options for restructuring and avoiding insolvency. Free consultations are usually offered.

Summary: Thriving not merely surviving as a limited company in 2025 be like…

We’re not yet at its half-way point, but it’s clear the economic landscape of 2025 presents significant challenges for UK businesses, particularly in sectors like hospitality, leisure, and retail.

Contractors supplying these three key sectors, or providing services to other sectors where the cost of doing business is still high,  must navigate these economic challenges with strategic planning, effective financial management, and adaptability.

By diversifying their client base, seeking early advice, and maintaining strong relationships, contractors can mitigate risks and position themselves for long-term success even in times of shifting and sustained economic pressures.