Businesses brush off prospect of rate rise – but 1-in-5 would struggle – R3
- 17 per cent of businesses would be put in ‘some difficulty’ with a 1 percentage point rise, 2 per cent in ‘serious’ difficulty.
- Majority of businesses unconcerned at prospect of interest rate rise.
Nearly one-in-five businesses (19%) say they would be put in financial difficulty by an interest rate rise*, according to the latest Business Distress Index from insolvency trade body R3.
The vast majority of businesses (72%) say they would be unaffected by an interest rate rise (2014: 70%).
Compared to last year, slightly fewer businesses say they would struggle after a rate rise (2014: 22%), but fewer expect to benefit too (2015: 4%; 2014: 7%). The share of businesses unsure how they will cope has increased from 1% to 5%.
R3’s Business Distress Index is a long-running survey of business concerns and growth prospects carried out by BDRC Continental.
Phillip Sykes, President of R3, says: “It is encouraging that so many businesses feel they would be able to brush off an interest rate rise. The problem for businesses in this situation is that although an interest rate rise wouldn’t necessarily affect them directly, it will affect customers. Businesses have to be ready for how consumers will react to higher borrowing costs.”
“A small rate rise means consumers will be spending more on their mortgages and maybe saving more rather than going out and buying businesses’ products.”
Phillip Sykes adds: “While it’s positive that the share of businesses that would struggle after a rate rise is falling, this still represents a substantial amount of businesses and jobs that could be put in difficulty.”
The survey also found that 4% of businesses – equivalent to 77,000 companies – say they would struggle to repay their debts if interest rates were to rise.
Phillip Sykes: “Although businesses have had plenty of headwinds to cope with since the recession, record low interest rates have been a real boost. Rising interest rates will be a real test for some businesses.”
*Of one percentage point or more in the next 18 months
Notes to Editors:
- 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 7th to 17th September 2015.