Britain’s businesses are facing a debt crunch as low-interest loans taken out at the end of last decade come to an end.
Replacing loans at current rates will cost £4.7 billion annually and some £42 billion by the end of the decade, consultant Baringa estimates.
Economist and Baringa partner Nick Forrest told the Telegraph that some companies will not be able to cope with the burden and will fail even with the prospect of base rates falling this year.
“It’s tempting to look at plateauing or falling interest rates and conclude we’re coming out of the woods.
“Sadly, this disguises the truth that the hike in rates since the end of 2021 condemns business and the wider economy to a huge hangover for years to come.
“In absolute pound terms, the UK faces the largest single hike in interest rate-driven debt servicing costs it has ever faced.”
Forrest added this would be a “rolling challenge” as corporate debts come up for refinancing.
Baringa estimates that debts worth £1.6 trillion are due to refinance between 2024 and 2030, while interest rates have risen from 0.1% to 5.25%.
Forrest said: “Ultimately those companies and sectors that are highly leveraged, that took out debt when it was that much cheaper, and are facing other headwinds, will struggle, and I am sure there will be some businesses where this is the last straw on the camel’s back.”