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

US FED rate rise.

  The US Federal Reserve officials have indicated that they plan to resume increasing interest rates to control inflation in the world's biggest economy. During the June meeting, the Federal Open Market Committee reached a consensus to keep interest rates stable for the time being to evaluate whether further tightening of policy would be necessary. However, the majority of the committee anticipates that additional rate increases will be required in the future. The minutes of the meeting have recently been made public. According to the minutes, most participants believed maintaining the federal funds rate at 5 to 5.25 per cent was appropriate or acceptable, despite some individuals wanting to raise the acceleration due to slow progress in cooling inflation. Although Fed forecasts predicted a mild recession starting later in the year, policymakers faced challenges in interpreting data that showed a tight job market and only slight improvements in inflation. Additionally, officials gr...
Post a Comment
Read more

India- UK trade deal.

  According to India's top trade official, talks with the UK regarding a trade agreement are progressing well, despite obstacles related to temporary work visas and the opening up industries like automotive and spirits. The Commerce and Industry Minister, Piyush Goyal, explained that India is seeking transition periods or greater market access in specific sectors due to its economy, which is slightly larger than the UK's and expected to outgrow it in the coming decades. If a trade deal is reached, it would be one of the most significant agreements for Britain since leaving the EU, and it would also be necessary for India, which surpassed the UK as the fifth-largest economy last year. Goyal stated that India aims to increase its economy from $3.5tn to $35tn by 2047, the country's centenary of independence. According to officials and diplomats in India, talks about a proposed trade deal may be finished by early September, just in time for the G20 summit in New Delhi. Nigel Hu...
Post a Comment
Read more

EU business slide.

  S&P Global’s flash eurozone composite purchasing managers’ index, a key gauge of business conditions for the manufacturing and services sector, fell 1 point to 47.1, figures showed yesterday. That is its lowest level since November 2020 and the fourth consecutive month below the crucial 50 mark separating growth from contraction. One of the few bright spots in the survey was that companies in all sectors reported a slight easing of cost pressures, price growth and supply chain constraints. However, prices charged for goods and services still rose at the sixth fastest rate since such data started in 2002. Jobs growth increased marginally from October but remained low compared with the past 18 months. Following a few months of falling price pressure in manufacturing and services, the October print shows an overall stabilisation said Jens Eisenschmidt, chief European economist at Morgan Stanley. However, German businesses, at the hub of Europe’s energy crisis, reported that manu...
1 comment
Read more