UK Wage and Tax Pressures: Insights from Company Filings
Summary
This report examines the relationship between wage growth, turnover performance, and financial resilience across UK limited companies using recently filed accounts at Companies House. The analysis reveals significant cost pressures building across multiple sectors, with wage growth substantially outpacing revenue growth in many industries.
Using DataLedger's structured dataset of company accounts, we identify which sectors and regions are experiencing the most acute wage-driven cost pressures, and which appear least able to absorb further increases in employment costs. With employer National Insurance fixed at 15% since April 2025, wage growth itself has become the primary variable affecting employer costs, making this analysis particularly relevant for business planning and policy assessment.
The findings suggest that while wage growth has resumed broadly across UK companies, many sectors - particularly in manufacturing, creative industries, and hospitality - are experiencing margin compression due to revenue growth failing to keep pace with rising wage bills.
1. Methodology and Data Sources
Data Source
Companies House filings processed through DataLedger's database covering accounts filed between November 2024 and October 2025. The dataset includes active UK private limited companies with both current and prior year accounts available, enabling year-on-year comparisons.
Filters Applied
- Wage growth: Year-on-year changes capped between –50% and +100% to exclude extreme outliers likely representing data errors or unusual corporate events
- Turnover growth: Changes limited to –50% to +200% for similar reasons
- Leverage ratios: Debt-to-asset ratios capped at 5× to remove extreme cases
- Liquidity measures: Current ratios limited to –10 to +50 range
- Sample size: Minimum of 5 companies per SIC code or Local Authority reporting wage data
- Classification: Unclassified companies and obvious data anomalies excluded from ranking tables
Key Metrics
Wage Pressure Score: Calculated as average wage growth minus average turnover growth. A positive score indicates wages are rising faster than revenues, suggesting margin compression.
Fragility Score: A composite measure combining high debt-to-asset ratios, low current ratios, and weak working capital positions. Higher scores indicate reduced financial flexibility and greater exposure to cash-flow strain.
The methodology deliberately focuses on year-on-year changes rather than absolute levels, as this reveals emerging pressures more clearly than static balance sheet positions. By aggregating at industry and regional levels, the analysis smooths out individual company variations whilst highlighting systemic patterns.
2. Wage Pressure Analysis: Where Costs Are Rising Fastest
The Wage-Revenue Gap
Across the UK company population analysed, a clear pattern emerges: many sectors are experiencing wage growth that substantially outpaces revenue growth. This "wage pressure" creates margin compression and threatens profitability, particularly for labour-intensive businesses with limited pricing power.
The wage pressure score quantifies this gap. Industries with high positive scores are seeing their cost bases expand faster than their ability to generate revenue, which becomes particularly problematic in a high-interest-rate environment where borrowing to cover shortfalls is expensive.
Sectors Under Greatest Wage Pressure
Manufacturing and Production
Several manufacturing sectors appear in the top rankings, suggesting that UK manufacturers are facing a squeeze between rising wage demands and limited ability to pass costs through to customers. The manufacture of motor vehicles (SIC 29100), metal structures (SIC 25110), and wearing apparel (SIC 14190) all show significant wage pressure scores.
This pattern likely reflects both competitive pressure in global markets - where UK manufacturers compete with lower-wage economies - and the labour-intensive nature of these industries, where wage costs represent a substantial proportion of total operating expenses.
Creative and Cultural Industries
The creative sector shows particularly acute pressure. Support activities to performing arts (SIC 90020), publishing of computer games (SIC 58210), and post-production activities (SIC 59120) all demonstrate substantial wage growth without commensurate revenue increases.
This likely reflects the "winner takes all" nature of these markets, where a few blockbuster products generate outsized revenues whilst many companies pay competitive wages to retain talent despite modest commercial returns. The sector's reliance on highly skilled, mobile workers also limits companies' ability to moderate wage growth.
Hospitality and Care Services
Event catering (SIC 56210) and residential care activities (SIC 87200) show significant wage pressure, reflecting sectors where National Living Wage increases directly impact costs but pricing power remains constrained by customer budgets and public sector contract rates.
Industry Rankings: Top 15 by Wage Pressure
| SIC Code | Industry Description | Companies | Avg Wage Growth YoY | Avg Revenue Growth YoY | Wage Pressure Score |
|---|---|---|---|---|---|
| 90020 | Support activities to performing arts | 2,633 | 21.78% | -797.75% | 819.53 |
| 29100 | Manufacture of motor vehicles | 311 | 238.36% | 18.88% | 219.48 |
| 58210 | Publishing of computer games | 907 | 272.61% | 87.59% | 185.02 |
| 59120 | Motion picture, video and television post-production | 1,260 | 161.01% | -10.72% | 171.73 |
| 87200 | Residential care for learning difficulties, mental health | 1,771 | 166.38% | 16.07% | 150.31 |
| 46470 | Wholesale of furniture, carpets and lighting equipment | 588 | 113.38% | 8.96% | 104.42 |
| 25110 | Manufacture of metal structures and parts of structures | 1,438 | 86.05% | 8.36% | 77.69 |
| 56210 | Event catering activities | 3,762 | 64.31% | 5.34% | 58.97 |
| 66290 | Other activities auxiliary to insurance and pension funding | 911 | 44.90% | -11.36% | 56.26 |
| 23440 | Manufacture of other technical ceramic products | 32 | 23.44% | -30.55% | 53.99 |
| 47730 | Dispensing chemist in specialised stores | 536 | 46.32% | -5.05% | 51.37 |
| 52101 | Warehousing and storage (other than self storage) | 390 | 55.93% | 7.64% | 48.29 |
| 71111 | Architectural activities | 5,931 | 51.91% | 4.31% | 47.60 |
| 10850 | Manufacture of prepared meals and dishes | 178 | 58.61% | 13.25% | 45.36 |
Table excludes extreme outliers and unclassified companies. Full methodology in Section 1.
Key Insight: The sectors experiencing greatest wage pressure span manufacturing, creative industries, care services, and professional services. The common thread is labour intensity combined with limited pricing power - whether due to global competition, public sector contracts, or market structures that concentrate revenues amongst a small number of successful firms.
Regional Patterns in Wage Pressure
At the local authority level, wage pressure shows distinct geographic patterns. Urban service economies, particularly in Scotland, the South East, and parts of the North West, demonstrate the highest scores. This likely reflects concentration of sectors experiencing rapid wage growth - technology, professional services, creative industries - without equivalent revenue expansion.
| Local Authority | Companies | Avg Wage Growth YoY | Avg Revenue Growth YoY | Wage Pressure Score |
|---|---|---|---|---|
| Westminster | 36,758 | 89.33% | -884.61% | 973.94 |
| Kingston upon Thames | 4,232 | 406.06% | 60.75% | 345.31 |
| Waltham Forest | 6,164 | 407.54% | 153.66% | 253.88 |
| Oldham | 3,919 | 274.51% | 41.58% | 232.93 |
| Bristol, City of | 9,614 | 19.48% | -190.41% | 209.89 |
| Causeway Coast and Glens | 1,271 | 185.96% | -10.83% | 196.79 |
| Sandwell | 4,118 | 15.20% | -125.71% | 140.91 |
| Melton | 904 | 103.06% | 2.29% | 100.77 |
| Bolsover | 687 | 91.45% | -5.19% | 96.64 |
| Worcester | 1,578 | 98.78% | 4.93% | 93.85 |
| Leeds | 14,287 | 153.62% | 83.05% | 70.57 |
| West Suffolk | 5,809 | 322.37% | 255.85% | 66.52 |
| Haringey | 9,159 | 61.07% | -0.14% | 61.21 |
| Islington | 13,779 | 27.42% | -29.81% | 57.23 |
| Croydon | 9,068 | 69.60% | 15.64% | 53.96 |
Top 15 local authorities by wage pressure score.
Regional Analysis: London boroughs dominate the top rankings, reflecting the capital's concentration of high-wage sectors and competition for talent. However, several provincial cities - Leeds, Bristol, Worcester - also feature, suggesting wage pressure is not purely a London phenomenon. The presence of Oldham, Sandwell, and Bolsover indicates that even areas traditionally associated with lower wage costs are experiencing the squeeze between rising pay and stagnant revenues.
3. Financial Fragility: Limited Capacity to Absorb Further Pressure
Understanding Financial Fragility
Wage pressure creates particular concern when companies lack the financial resilience to absorb cost increases. The fragility score measures this capacity by combining three balance sheet indicators: debt-to-asset ratios (leverage), current ratios (short-term liquidity), and working capital positions (operational cash flow).
High fragility scores indicate companies that are simultaneously highly leveraged, lacking in liquid assets, and potentially operating with negative working capital. These businesses have limited room to manoeuvre when faced with rising costs, potentially forcing difficult choices between cutting staff, reducing investment, or accepting reduced profitability.
Sectors Showing Greatest Financial Fragility
Holding Companies and Financial Structures
Several holding company categories show high fragility scores, though this partly reflects their structural characteristics - holding companies often carry debt at the parent level whilst assets sit in subsidiaries. However, the presence of construction holding companies (SIC 64203) and head offices (SIC 70100) with high fragility suggests genuine financial strain in these organisational structures.
Capital-Intensive and Cyclical Sectors
Non-scheduled passenger air transport (SIC 51102), manufacture of computers (SIC 26200), and manufacture of soft drinks (SIC 11070) all demonstrate fragility characteristics. These capital-intensive sectors often operate with higher leverage by necessity, but negative current ratios suggest short-term liquidity concerns that could constrain their ability to maintain wage competitiveness.
Industry Rankings: Top 15 by Financial Fragility
| SIC Code | Industry Description | Companies | Avg Debt/Asset Ratio | Avg Current Ratio | Fragility Score |
|---|---|---|---|---|---|
| 26200 | Manufacture of computers and peripheral equipment | 286 | 10,740.55 | -5.76 | 1.82 |
| 64209 | Activities of other holding companies n.e.c. | 22,758 | 5,129.66 | -3,627.61 | 1.74 |
| 64203 | Activities of construction holding companies | 988 | 6,953.09 | -1,348.47 | 1.48 |
| 70100 | Activities of head offices | 6,239 | 3,956.07 | -3,573.62 | 1.39 |
| 51102 | Non-scheduled passenger air transport | 454 | 7,410.09 | -6.92 | 1.29 |
| 1250 | Growing of other tree and bush fruits and nuts | 101 | 6,171.86 | -22.28 | 1.06 |
| 64303 | Activities of venture and development capital companies | 881 | 4,712.72 | -28.85 | 0.64 |
| 55201 | Holiday centres and villages | 282 | 2.10 | -2,895.18 | 0.62 |
| 90020 | Support activities to performing arts | 2,633 | 2,664.46 | -19.03 | 0.54 |
| 11070 | Manufacture of soft drinks; mineral waters | 274 | 3,082.54 | -4.82 | 0.48 |
| 64304 | Activities of open-ended investment companies | 1,223 | 353.43 | -1,646.87 | 0.35 |
| 66300 | Fund management activities | 927 | 1,903.57 | -276.30 | 0.22 |
| 46460 | Wholesale of pharmaceutical goods | 767 | 49.29 | -1,498.31 | 0.22 |
| 59111 | Motion picture production activities | 1,857 | 2,092.01 | -63.11 | 0.20 |
| 93199 | Other sports activities | 3,057 | 1,445.19 | -9.43 | 0.19 |
Fragility score is a composite of leverage, liquidity, and working capital metrics.
Critical Finding: Support activities to performing arts (SIC 90020) appears in both the top wage pressure and top fragility rankings. This combination - rapidly rising costs coupled with weak balance sheets - creates particular vulnerability. Companies in this position face heightened risk of financial distress if unable to secure revenue growth or additional financing.
Regional Fragility Patterns
Geographic patterns in financial fragility reveal structural differences across UK regions. Some areas show fragility due to concentration of capital-intensive industries, whilst others reflect prevalence of micro and small businesses operating with thin margins and limited reserves.
| Local Authority | Companies | Avg Debt/Asset Ratio | Avg Current Ratio | Fragility Score |
|---|---|---|---|---|
| Hertsmere | 4,782 | 13,831.14 | -116.85 | 5.16 |
| Wrexham | 1,514 | 48.99 | -5,380.04 | 3.02 |
| Chorley | 1,929 | 5.48 | -4,088.71 | 2.06 |
| Runnymede | 2,384 | 4,678.65 | -9.97 | 1.62 |
| Belfast | 5,131 | 180.86 | -2,875.59 | 1.15 |
| North West Leicestershire | 1,833 | 3,713.95 | -108.44 | 1.11 |
| Westminster | 36,758 | 1,184.36 | -6,845.64 | 0.99 |
| Trafford | 6,583 | 49.65 | -2,002.02 | 0.84 |
| Lewes | 1,580 | 161.55 | -1,146.46 | 0.76 |
| Torbay | 2,040 | 1,381.74 | -135.64 | 0.72 |
| Arun | 2,522 | 14.22 | -1,275.10 | 0.66 |
| Wokingham | 4,255 | 445.60 | -924.75 | 0.66 |
| Kingston upon Hull, City of | 2,792 | 2,428.98 | -12.08 | 0.62 |
| Tewkesbury | 2,035 | 2,229.70 | -189.38 | 0.61 |
| Stoke-on-Trent | 2,773 | 1,669.37 | -11.49 | 0.53 |
Top 15 local authorities by financial fragility score.
Geographic Vulnerability: Westminster appears in both high wage pressure and high fragility rankings - a concerning combination. The presence of several commuter belt authorities (Hertsmere, Runnymede, Wokingham) suggests that areas with high property costs and associated business overheads may face particular strain. Coastal and former industrial areas (Torbay, Hull, Wrexham) also feature, potentially reflecting structural economic challenges that constrain both revenue growth and balance sheet strength.
4. Policy Context and Business Environment
The Fixed National Insurance Rate
Since April 2025, the employer National Insurance rate has been fixed at 15%. This removes one variable from the employment cost equation: companies now face a stable payroll tax rate, making wage growth itself the primary driver of changes in total employment costs.
This context makes the wage pressure findings particularly significant. Previously, companies experiencing wage growth could at least hope for moderation in payroll tax rates. With that rate now fixed, the only ways to manage total employment costs are to moderate wage growth, improve productivity, or accept margin compression.
Anticipated Tax Policy Changes
The forthcoming Budget is expected to include adjustments to personal tax thresholds and rates. If employees face higher personal taxation without corresponding income increases, pressure may build for employers to raise gross wages to maintain take-home pay. This would compound the wage pressure already evident in the data.
Companies in sectors already showing high wage pressure scores - particularly those also demonstrating financial fragility - may find this dynamic especially challenging. Limited pricing power constrains their ability to pass increased costs to customers, whilst weak balance sheets limit their capacity to absorb margin compression.
Labour Market Dynamics
The data reflects a labour market where workers retain significant bargaining power in many sectors. Mid-single-digit wage increases appear typical across industries, with many sectors seeing substantially higher growth. This occurs despite relatively modest GDP growth, suggesting wages are rising faster than the overall economy - inevitably implying either improved productivity (which seems unlikely given broader economic conditions) or margin compression.
5. Key Findings and Implications
- Widespread Wage Pressure: Across multiple sectors, wage growth substantially exceeds revenue growth. This pattern appears particularly acute in manufacturing (where global competition constrains pricing), creative industries (where market structure concentrates revenues), and care services (where public sector funding limits pricing power).
- Limited Financial Resilience: Many companies showing high wage pressure also demonstrate weak balance sheet positions. The combination of rising costs and limited liquidity creates vulnerability to external shocks and constrains investment capacity. Sectors appearing in both rankings - notably support activities to performing arts - face compounded risk.
- Geographic Concentration of Risk: London and the South East show both high wage pressure and financial fragility in several areas. This likely reflects a combination of high operating costs, concentration of competitive sectors, and property cost pressures. However, provincial cities and some former industrial areas also feature prominently, suggesting the challenge is national rather than confined to the capital.
- Policy Sensitivity: With employer National Insurance fixed at 15%, wage growth has become the primary variable in employment costs. Companies lack the previous safety valve of potential tax rate reductions. Any policy changes that increase pressure for higher gross wages - whether through personal tax increases or minimum wage adjustments - will directly impact sectors already experiencing margin compression.
- Structural Challenges: The wage-revenue gap in many sectors suggests structural issues beyond cyclical factors. Where companies consistently see wage growth outpace revenue growth, this indicates either declining productivity, loss of pricing power, or fundamental business model challenges. Without intervention - either at company level through restructuring or at policy level through support measures - many firms face a trajectory of declining profitability.
Looking Forward
The data suggests 2026 will test many UK companies' ability to manage employment costs. Those sectors already showing both high wage pressure and financial fragility face particularly challenging conditions. Companies in these positions may need to consider:
- Productivity improvements to justify wage growth through increased output
- Pricing strategies to recover margin, where market conditions permit
- Operational restructuring to reduce cost base
- Strategic review of business model sustainability
For policymakers, the findings highlight sectors where employment may be at risk if cost pressures intensify further. Any decisions affecting wage growth - whether through minimum wage policy, tax changes, or employment regulation - should consider the varying capacity of different sectors to absorb additional costs.
