Businesses dreading rise in interest rates

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Nearly one in three businesses in the North would be in financial difficulty if interest rates rise by one per cent or more 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 business owners and directors. Richard Wolff, North West regional chair of R3 and Head of Corporate Recovery and Insolvency at JMW Solicitors in Manchester, said that despite the economic recovery over the last year, the figures show that not all businesses are out of the woods yet.

“A period of economic recovery is just as tough a time for some businesses to negotiate as a recession, if not tougher,” he said.

“Normally, insolvencies peak after a recession but it’s fair to say that we haven’t seen that this time around.

“Extremely low interest rates and accompanying high levels of creditor forbearance have helped keep lots of businesses going that in past recessions would have gone insolvent.

“The good news is that some businesses that might have expected to struggle following the financial crisis of 2008 have been given a significant amount of extra time to put their finances in order.”

He added: “A one per cent rise in interest rates is at the upper limit of what we might expect in the next eighteen months. Policymakers should certainly bear in mind that many businesses still feel that they are close to the edge.”