Higher employment costs as a result of the budget may push more British businesses into financial difficulty, according to the UK’s largest insolvency practitioner.

Begbies Traynor said increased employment costs, as well as higher interest rates, would extend a period of “elevated insolvency levels”, in a statement to the stock market on Monday.

The Labour government last month raised taxes on business steeply to cover the cost of increased spending on the NHS, schools and the armed forces in its first budget for 14 years.

Rachel Reeves’s decision to raise employers’ national insurance contributions provoked a chorus of protests from businesses. Unlike corporation tax, a rise in national insurance contributions affects every business with employees, whether profitable or not.

The prospect of higher government spending is also expected to prompt the Bank of England to keep interest rates higher for longer in an attempt to keep inflation below its 2% target. Higher borrowing costs tend to lead to more corporate insolvencies.

Ric Traynor, the executive chair of Begbies Traynor, said: “Additional headwinds for UK business from increased employment costs and the prospect of higher for longer interest rates are likely to extend the period of elevated insolvency levels, increasing the need for advice and support from our insolvency and business recovery professionals.”

The UK government’s Insolvency Service said last month that company failures had fallen 7% to 1,973 in September compared with last year, but “the number of company insolvencies remained much higher than those seen both during the Covid-19 pandemic and between 2014 and 2019”.

There were 4,400 company insolvencies in the third quarter of 2019, compared with 6,000 in the same period in 2024.

Begbies Traynor is seen as one of the main beneficiaries of higher insolvencies, as companies turn to it for advice on restructuring or bankruptcy proceedings. It reported revenues and profits before tax up 16% in the six months to the end of October compared with last year.

However, it has struggled to turn the increased revenues into share price growth. The share price of the company, listed on London’s Alternative Investment Market, has fallen by more than a third from its peak in the summer of 2022.

The company said its employment costs were expected to rise by £1.25m because of the increase in employers’ national insurance contributions.