Bank Support & Business Recovery

The upward trend of distressed operational real estate situations we saw in the latter half of 2023 continued into 2024. This resulted in the number of distressed businesses we were instructed to sell last year being in line with 2023, when our activity returned to the pre-pandemic level of 2019.

Persistent inflationary pressures and the higher cost of servicing debt have been key factors impacting many businesses over the last few years, decreasing their operating margins and profitability. Inflation declined significantly during 2024, reaching a low of 1.7% in September but rising in the two subsequent months to 2.6% in November. This created uncertainty over the downward trajectory of future interest rates which had reduced to 4.75% by November, after peaking in September 2023 at 5.25%. Any relief from interest rate cuts is likely to be afforded through reductions in small increments over a prolonged period indicating that the cost of borrowing will continue to be a burden on businesses during 2025.

We have seen continued forbearance from mainstream lenders to pent up debt by extending capital repayment holidays or loan facilities to give borrowers time to refinance. Notably, we saw an increase in the number of consensual sale mandates we dealt with in 2024 where directors were actively attempting to refinance while marketing their businesses for sale through Christie & Co. In some cases, the decision to sell was driven by the incumbent lender offering forbearance as leverage over a borrower to ensure the potential for more than one route to exit the relationship. This behaviour was most prevalent when confidence in the ability of a borrower to refinance was low. Conversely, we witnessed a lesser degree of forbearance by some challenger banks, bridging and tertiary lenders who were quicker to appoint administrators or receivers to enforce their security and sell assets to recover their loans.

Perhaps the biggest threat to business in 2025 is the budget set in November 2024 by the newly elected Labour government. Headlined as a budget for growth through a significant increase in public spending, financed by a combination of tax rises and higher borrowing, the reality is that an increase in employers’ National Insurance contributions, the National Living Wage and Minimum Wage and a reduction in business rate relief from 75% to 40% will stifle growth for many SME’s. The significant increases in payroll and rates are likely to put further pressures on operational margins during 2025 and jeopardise investment.

• Business distress which trended up from Q3 2023 through 2024 will continue at similar levels in 2025
• Tax rises implemented in the November 2024 budget will result in increasing business distress and failure for a swathe of SMEs already operating on the thinnest of margins
• A steady increase in demand for turnaround and restructuring support as businesses continue to face ongoing pressures and uncertainty
• Relief for businesses from stabilised inflation but the cost of borrowing will remain a challenge as interest rates reduce in small increments over a prolonged period