Back to listing


One-in-five businesses would struggle with interest rate rises – R3

  • 6 per cent of businesses would be put in ‘serious’ financial difficulty with 1 percentage point rise by end of 2015, 16 per cent in ‘some’ difficulty;
  • Majority of businesses unconcerned at prospect of interest rate rise. 

Over 1-in-5 businesses say that they would be put into financial difficulty if interest rates were to rise by at least one percentage point in the next 18 months, according to a report by insolvency trade body R3.

The findings come from R3’s latest Business Distress Index, a long-running survey of a nationally representative sample of 500 business owners and directors.

Insolvency experts say that, despite the economic recovery over the last year, the figures show not all businesses are out of the woods yet.

R3 president Giles Frampton 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 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.”

Giles Frampton adds: “A one percentage point rise in interest rates is at the upper limit of what we might expect in the eighteen months, but policymakers should bear in mind that many businesses still feel they’re close to the edge of their comfort zone.”

Six per cent of UK businesses say they would be put into ‘serious’ financial difficulty were interest rates to rise over the next eighteen months, while 16 per cent said they would be put into ‘some’ difficulty.

The vast majority of businesses appear relaxed about the prospects of an interest rate rise, with 70 per cent saying they would be unaffected. Seven per cent of businesses believe they would benefit from an interest rate rise.

Giles Frampton says: “Businesses may be expecting their bank to absorb any interest rate rises – banks have not been applying nearly as much pressure on their business customers when it comes to basic business lending as they were after the early ‘90s recession.”

“Also, given how consistent speculation about rate rises has been in the last few months, many businesses will be planning ahead anyway.”

Giles Frampton adds: “An interest rate rise will have the biggest impact on ‘zombie businesses’ – those that are already only paying the interest on their debts – and personal finances.”

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.

R3’s latest research was carried out by market research company BDRC Continental via their Business Opinion Omnibus. Telephone interviews with a nationally representative sample of senior financial decision makers at 500 UK businesses, weighted by size, region, and sector took place between 2 and 12 June 2014.

BDRC Continental:

Research undertaken by BDRC Continental, an award-winning insight agency. Questions were put to 500 UK businesses via BDRC Continental’s monthly Business Opinion Omnibus. Telephone-based interviews with a nationally representative sample of senior financial decision makers across the UK, weighted by size, region and sector. Fieldwork dates 2nd to 12th June 2014



Notes to editors:

  • R3 is the trade body for Insolvency Professionals and represents the UK’s Insolvency Practitioners.

  • R3 comments on a wide variety of personal and corporate insolvency issues. Contact the press office, or see for further information.

  • R3 promotes best practice for professionals working with financially troubled individuals and businesses; all R3 members are regulated by recognised professional bodies
  • R3 stands for 'Rescue, Recovery, and Renewal' and is also known as the Association of Business Recovery Professionals.