Debt worries rise for UK businesses
July 28th, 2017
Four times more businesses than in September 2016 say they would be unable to pay debts if interest rates rise even by a small amount, research has revealed.
A survey by insolvency and trade body R3 say 79,000 UK businesses are worried that they could not cope with an interest rate rise, compared to 20,000 10 months ago.
’It appears that the number of businesses walking a debt tightrope is rising significantly,” Said Martin Williamson, Managing Director of ipd.
“There may be several reasons for this; Brexit concerns have made life difficult for importers, for example, while businesses face additional costs due to the roll-out of pensions auto-enrolment and a rising National Living Wage.
“On the other hand, some businesses may be taking advantage of low interest rates to invest in their operations and are, therefore, paying off less debt.”
The financial picture is a mixed one, according to R3 and the Government’s Insolvency Service. Actual company insolvencies we down in Quarter One of 2017 when compared with the final quarter of 2016 but the 2016 Q4 figure was skewed by a high level of connected personal finance businesses entering liquidation simultaneously due to changes in expenses rules.
Martin added: “The underlying trend for company insolvencies has risen for the third quarter in a row.
“The figures for people not paying off debts is a concern when compared with recent indications that we may be getting closer to a rise in interest rates from the Bank of England.
“Where businesses are feeling pressure regarding debt, the best advice is to seek early intervention from an insolvency practitioner. Evidence shows that many companies can avoid insolvency if rescue plans are put in place sooner rather than later.”