As we approach 2025, businesses and individuals across various sectors are gearing up for a year of challenges and opportunities shaped by changes in taxation, economic stability, and evolving market dynamics. Our experts have shared their predictions for the year ahead, offering insights to help you plan strategically and adapt to the shifting landscape.
General Market Sentiment for Deals
The main Capital Gains Tax (‘CGT’) rate change on 30 October 2024 provides an opportunity for transactions to refocus on commercial drivers rather than immediate tax implications. This is welcome after the rumours of significant CGT rate increases prior to the Budget.
However, the upcoming changes in CGT Business Asset Disposal Relief will have an impact on transactions for those shareholders who still have their £1m lifetime allowance. From 6 April 2025, the CGT rate will rise from 10% to 14% for those assets that qualify for Business Asset Disposal Relief, with a further increase to 18% planned for April 2026. While some deals are being expedited to avoid these changes, it is crucial to ensure that the wider commercial aspects of the deal remain in focus. Business owners looking to pass down their companies to the next generation should also revisit their plans in light of the changes to Inheritance Tax rules from April 2026.
We anticipate a rise in deal activity during 2025 as businesses adapt to greater stability in tax, inflation, and interest rates, at least in the short term. Shareholders considering an exit within the next 1-3 years may accelerate their plans to leverage the current known economic environment. Buyers, including corporates and private equity firms, are expected to remain active, supported by significant funds ready for deployment. However, rising Employers NIC and the national minimum wage are likely to influence deal values or structures as acquirers seek to mitigate potential risks to future
profitability which underpins their investments. These dynamics will vary across sectors, with cost-sensitive industries feeling the impact more acutely.
Ross Wiggins | Partner
Manufacturing
Manufacturers must adopt a proactive approach to remain competitive in 2025. Strategic planning and robust contingency measures will be essential to navigate potential disruptions. The rapid integration of AI and other technological advancements will be a critical differentiator, as businesses that fail to invest in innovation risk falling behind competitors.
Rising employer costs, including increased NIC contributions, will present significant challenges for businesses with large workforces. Geopolitical developments and a shift towards more protectionist trade policies could further complicate global trade dynamics. Manufacturers may wish to adapt their strategies to account for potential tariffs and shifts in trade relationships.
Bethan Evans | Partner
Hospitality and Leisure
We see the different parts of the hospitality and leisure sector having a mixed 2025. For instance, the hotel market seems to be booming with travel rising to the levels seen before Covid and the room rates also continuing to rise, especially in the bigger cities. This has fuelled the valuations of hotels and seems to suggest that the year could see further M&A activity in this industry. On the other hand, the most recent budget has not done any favours for the restaurant and bar trade. With already wafer-thin margins and some businesses only seeing normal trade
3 to 4 days a week because of the desire on the part of employees to work from home more often, the budget changes to National Insurance for corporates mean a further squeeze on profitability, which can only be overcome by businesses becoming more efficient generally and clever in persuading customers to come to their venues in the quiet periods. In addition, operators will need to control staffing and stock holding costs to meet the erratic demand.
Freddy Khalastchi | Partner
Property and Construction
The property and construction sector faces a mixed outlook for 2025. While not as heavily impacted as hospitality and leisure by recent budget measures, it remains vulnerable to broader economic trends. Instability in the job market could reduce activity in new builds and corporate lettings, indirectly affecting house prices. The Office for Budget Responsibility (OBR) has forecast slow growth in this sector, highlighting its sensitivity to economic pressures.
The political focus on building housing is welcome. If the money is available to get it done, the challenge will be whether there is enough capacity in the market to achieve it. To achieve this, there must be
innovative ways to fund the sector.
The sector’s historical resilience has helped it weather economic storms, and businesses that adapt effectively could emerge stronger, benefiting from reduced competition and their own resilience.
John Cullen | Partner
Transport and Logistics
Transport and logistics businesses are likely to face continued challenges in 2025, with insolvencies expected to rise, particularly if prices for fuel remain high. There are also raised concerns regarding expected US tariff changes from president-elect Trump, triggering shipping costs to already double. Therefore, creating a worry that prices will increase and remain higher for longer. The sector must also contend with pressures due to the growing importance around Environmental, Social, and Governance (ESG) compliance. Therefore, it is crucial for the industry that they are aware of, and manage, their emission levels and are doing their utmost to minimise their impact to the environment. This will be critical to staying competitive and meeting stakeholder expectations.
Partnering with ESG specialists can help businesses identify areas for improvement, reduce carbon footprints, and enhance overall performance. Companies that proactively address these challenges, and take on the advice, will be better positioned to thrive in an increasingly sustainability-focused market.
Giuseppe Parla | Director
Retail
The retail sector is facing another tough year in 2025, with many of the same challenges continuing to weigh on the industry. Trading conditions remain difficult, and staying successful will take real effort. The quantity of physical stores are shrinking as retailers seek ways to improve efficiency and adapt to changing shopping habits. On top of this, rising Employer NIC and the financial pressures that are already hammering hospitality and leisure businesses are starting to chip away at retail margins too.
Shoppers are becoming savvier with their spending, especially as inflation has edged up again this month. Retailers are holding their breath to see what the Christmas shopping season brings and are scrambling to boost sales through tactics like refurbishment and fresh offerings. Unfortunately, the decline in high street stores is creating a cycle that’s hard to break – fewer shops mean less foot traffic, and less foot traffic means fewer shops.
Still, there are some bright spots. The beauty and personal care market, as well as healthcare and
supplements, continue to thrive. Success in these areas shows that retailers offering strong products, running efficient operations, and keeping their customers happy can still come out on top. While moderate growth is on the cards for 2025, much depends on inflation cooling off and interest rate cuts helping to rebuild consumer confidence.
Jonathan Bass | Partner
Forensic Accounting and Valuation Services Predictions
2025 is shaping up to be a busy year for valuation work. Succession planning and inheritance tax are hot topics, and we’re already seeing more valuations being requested to prepare for changes to tax rules. The business property relief changes are driving activity, with clients wanting to get ahead of potential impacts. Employee Ownership Trusts (EOTs) are also in the spotlight, as new rules mean trustees have an obligation to ensure shares are transferred at market value. This makes accurate valuations more critical than ever to avoid overpayment or triggering scrutiny from HMRC.
In Forensic and dispute work, there is likely to be further developments in the group litigation arena with notable cases concluding.
We also expect to see more shareholder and investor disputes, increased regulation around litigation funding, and group claims. Topics such as “secret commissions”, international trade disputes, ESG and AI and cyber-related issues are likely to feature prominently. Pension disputes, professional negligence cases, and privilege claims against shareholders are all set to keep forensic experts busy as we head into the new year.
Fraud is another big topic, particularly with the new “failure to prevent fraud” offence which may ripple through to M&A activity. It could lead to damage to reputations, and breach of warranty claims.
Looking ahead, 2025 promises to be a pivotal year for businesses across all sectors. From navigating tax changes to adapting to technological advancements and geopolitical shifts, preparation will be the key to success. We are here to provide expert guidance and support to help you make informed decisions and achieve your strategic goals. Whether you’re in financial distress, planning an exit, considering an acquisition, or simply looking to future-proof your business, our team is ready to assist you every step of the way.