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1 in 5 to struggle with interest rate rises 23 June 2014

As many as one in five UK businesses would face financial difficulty should a one percentage point rise in interest rates occur by the end of 2015, says insolvency trade body R3.

A survey of 500 UK businesses found that 6% said they would experience “serious financial difficulty”, while 16% said they would expect “some difficulty”.

However, the majority of respondents appeared to be unfazed by the prospect, with 70% saying they would be “unaffected”. Some 7% of businesses believe they would benefit from an interest rate rise.

R3 president, Giles Frampton, said: “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 this time around. 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.”

Research by R3 in November 2013 found that 6% of UK businesses (103,000 businesses) were only paying the interest on their debts, although this was down from 9% (160,000) in November 2012.



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