Skip to main content

Interest rates

 An expected surge in interest rates triggered by Friday’s budget has triggered fears for the future of indebted companies, with hundreds of thousands already in financial distress. With the financial markets now pricing in an interest rate rise to 5 per cent by March, concerns are mounting that companies across the UK will be unable to service the corporate debt taken out when rates were at rock-bottom levels. Meanwhile, the most dramatic budget continued dividing opinion in the business world. Tech chiefs warmly applauded the extension to EIS and venture capital trust schemes for start-ups and seed capital.


David Fleming, UK head of restructuring at the consulting firm Kroll, said insolvencies were already rising because of supply chain pressures, energy costs and wage increases. «Five per cent interest rates will heap more pressure on cashflow and profitability,» he said. Although businesses were granted government-backed loans during Covid, many on fixed rates, the Bank of England has calculated that 70 per cent of lending was given outside of the emergency schemes and is exposed to floating rates. High street campaigner Bill Grimsey has said at least 50,000 independent retailers and hospitality businesses are at risk of folding after accruing £1.7 billion of debt.


Will Wright, head of restructuring at Interpath Advisory, said «zombie» companies with high debt levels had been primarily supported by low-interest rates. However, Ravi Anand, managing director of the business lender ThinCats, said consumer-facing businesses would suffer first. «With most bank lending on a floating margin, higher interest rates will only exacerbate this trend,» he said, adding that the mini-budget and the continued fall in the value of sterling means «importers will become challenged unless they can pass on some of the cost increase».

www.sba.tax

Labels:

Comments

Post a Comment

Cloud Bookkeeping

HS2 cost cuts new routes and add delays.

 Trans­port depart­ment offi­cials have begun work on «Project Sil­ver­light» sug­gest­ing the high­speed rail scheme might face four addi­tional years of delay. The planned High Speed 2 rail line faces fur­ther delays of up to four years and more cuts to the project under plans being drawn up by min­is­ters to rein in its bal­loon­ing costs. The extra delays to the coun­try’s biggest infra­struc­ture project would mean that it would not be com­pleted until as late as 2045 — 12 years after ori­gin­ally planned. «This is a func­tion of infla­tion; we are hav­ing to find huge sav­ings because the cost of everything the depart­ment is already doing will have become so much more expens­ive by then,» said one gov­ern­ment offi­cial. In Octo­ber, the FT repor­ted that the Treas­ury had asked HS2’s man­age­ment team to identify poten­tial cuts or «scope reduc­tions» to the high-speed line. Trans­port depart­ment offi­cials have sub­sequently begun work on Project Sil­ver­light aimed at fi...
4 comments
Read more

Doubt on CS's collateral.

  Credit Suisse provided an emergency $140mn loan to Greensill Capital based partly on invoices to companies that deny ever doing the business stated on the documents. The Swiss bank provided the loan in October 2020, less than five months before the collapse of Greensill, a supply chain finance firm that counted former British prime minister David Cameron as a senior adviser. Invoices issued by metals magnate Sanjeev Gupta’s Liberty Commodities and sold to Greensill formed part of the collateral for the loan, according to documents seen by the Financial Times and people familiar with the transaction. Yet several of the parties named on the invoices have told the FT they did no business with Liberty. GFG has consistently denied any wrongdoing. Credit Suisse’s loan had a clause dictating that the collateral value had to be equal to or greater than the $140mn borrowed. The terms of the debt agreement only allowed invoices on Green-sill’s balance sheet to count towards this tally if t...
2 comments
Read more

Small business will be excluded from fraud law.

  Min­is­ters are plan­ning to exclude small busi­nesses from anti-fraud legis­la­tion by nar­row­ing the scope of a crim­inal offence tar­get­ing com­pan­ies that fail to pre­vent eco­nomic crimes. MPs and anti-cor­rup­tion cam­paign­ers had hoped the gov­ern­ment would seek to amend the eco­nomic crime and cor­por­ate trans­par­ency bill to ensure the new offence covered all com­pan­ies. The plans to limit the scope of the amend­ments will also dis­ap­point those who had hoped the legis­la­tion would remove key hurdles to the pro­sec­u­tion of white-col­lar crime. A new «fail­ure to pre­vent» offence for fraud would bring it in line with exist­ing sim­ilar cor­por­ate offences for bribery and tax eva­sion. At present, pro­sec­utors need only prove that organ­isa­tions lacked «reas­on­able» or «adequate» con­trols to pur­sue the offence in bribery and tax eva­sion cases. «It would be much more sens­ible for the gov­ern­ment to provide strong guid­ance for SMEs on what these pro­ce...
3 comments
Read more