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Fears over future rising interest rates
ONE in five south east businesses would struggle with interest rate rises, according to a new study.
More than 20 per cent say they would face financial difficulty if interest rates were to rise in the next 18 months by at least one percentage point, the report by insolvency trade body R3 found.
The findings come from its latest business distress index, a long-running survey of a nationally representative sample of business owners and directors.
Insolvency experts from R3’s southern regional committee say that, despite the recovery over the past year, the figures show not all businesses are out of the woods yet.
Andrew Watling, pictured, southern committee chairman and director at Quantuma in Southampton, says: “Economic recovery is just as tough a time for some businesses to negotiate as a recession, if not tougher.
“Normally, insolvencies peak after a recession, but we haven’t seen that.
“Record low interest rates and high levels of creditor forbearance have helped keep lots of businesses going.
“The good news is that some businesses that might have expected to struggle after 2008 have been given extra time to put their finances in order.
“However, there is still a big chunk of businesses that will struggle once ‘normal’ recovery conditions, like rising interest rates, return.”
Just a one percentage point rise in interest rates is at the upper limit of what might be expected in the eighteen months.
But Mr Watling added: “Policy makers should bear in mind that many businesses still feel they’re close to the edge of their comfort zone.
“An interest rate rise will have the biggest impact on the south east’s ‘zombie businesses’ – those that are already only paying the interest on their debts – and personal finances."