After Carillion, another rise in the bank rate could mean curtains for some local companies
January 15th, 2018
Last November’s 0.25% rise, although small, was already affecting those companies that were operating on wafer-thin margins. My own view on this is that the relatively small increase in the Bank of England interest rate to 0.5% has already had an effect on the number of enquiries I have been receiving of late – and that was before the shock of Carillion going under.
We had already been monitoring a noticeable increase from business owners who are taking “early steps” to seek advice as their financial position deteriorates. The demise of Carillion, which has an extensive supply chain involving smaller companies, now has an immediate potential to send further ripples through the Staffordshire economy.
There is already a generation of consumers and business people who have lived the majority of their lives with interest rates at a marginal level and they have never had to cope with anything like the almost 15% rate we saw in 1989. We do not need another shock any time soon.
I would urge the Bank of England, which has indicated that the rate will rise slowly over the next few years, to delay the next rise for as long as possible. Even a rise of another 0.25% will present some companies with immediate difficulties and for others it may well mean the end of the road.
Apart from a rising bank rate and the Carillion effect, I have to say that the growing number of businesses going bust and concern over the rise of young people in Staffordshire becoming personally insolvent are worrying indicators for the local economy and this could well extend to the larger UK economy.
No business can afford to be complacent in the current financial environment.
With Carillion’s demise being such an immediate headline, no doubt more information will become available in the coming days. I will publish a more in depth view on the ripples emanating from Carillion when there has been the opportunity to assess them properly…