At least 50 per cent of companies in the United Kingdom (UK) will struggle to service their debts due to rising interest rates – up from 45% in 2022, according to the Bank of England.
The UK’s interest rate currently stands at 5.25%, up from the record low of 0.1 per cent in November 2021, with the bank expecting this to rise further to 6.1per cent.
Its analysis reveals that medium-sized firms with an annual turnover of £10million-£500million, which typically depend more on borrowing and lending than larger companies, will be at particular risk, with 70 per cent expected to struggle.
This would mean corporate debt stress reaching its highest level since the financial crash of 2008-09.
“Higher interest rates are putting pressure on indebted corporates through higher debt servicing costs. Such pressure increases the likelihood of defaults on corporates’ debt and may lead some firms to reduce investment and employment sharply,” he pointed out.
Statistics from the Insolvency Service show that the number of registered company insolvencies in England and Wales in the three months to June was 6,342, the highest level since the second quarter of 2009.
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