27 Nov 2025
By David Alexander, Partner and Head of Debt Recovery, Gilson Gray
In the run up to the Budget, there was a general sense of doom across the nation. The significant fiscal black hole created concern in the business world that taxes would be inevitably rise.
Some of those concerns were borne out by the Budget, not least with regards to the increase in the minimum wage. Many businesses have been suffering with regards to the costs of running their business, and the increase in the minimum wage will simply exacerbate those problems, especially in the tourism and hospitality sectors.
This will cause additional difficulties for businesses already struggling in the current economic climate. These businesses are now going to encounter further cashflow challenges. This may well cause a number to fall into financial distress. This past 18-24 months have been difficult. Things unfortunately may well get a bit worse.
It will, therefore, be imperative for those businesses feeling the pinch to protect themselves, and to protect their cash flow. They will need to start collecting payment of their own invoices sooner rather than later. They will most probably do so by reducing their own payment terms and increasing their levels of aggression in relation to their own cash collection efforts. This will likely lead to higher levels of litigation which, if successful, may well have a knock-on effect to other businesses further down the ladder.
It is going to be more important than ever for businesses to ensure they recover their cash quickly. The threat of litigation is a powerful tool in these circumstances. I strongly suspect this tool is going to be used more often in the next few years.
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