Ruth Mitchell

Debt concerns continue to linger

Almost a quarter of UK businesses (24%) have concerns about their debts, according to the latest business distress Index produced by insolvency trade body R3.

And for those businesses that are in this position, their worries have intensified during the last quarter, with small businesses feeling particularly vulnerable.

The most significant increase reported in the research is concern over bank loans and other finance debt, which remains the type of debt that causes businesses most concern.

Over the last six months, there has been a worrying increase of firms with concerns in these areas rising from 24% in September last year up to 43% currently.

R3 believes that this points towards an escalation of financial difficulties amongst small businesses that have been struggling for some time, and may have used up all reserves in coping with the recession.

Linda Farish, chairman of the north east arm of R3 and director of recovery & insolvency at Newcastle-based accountants RMT, says: “An alarming minority of the business community are struggling to address their financial situation, and if these distressed businesses continue without seeking help, they may lose control of their mounting debt, which could push them into insolvency in the coming quarter.

“Companies which allow their debts to mount up instead of being able to pay them off will not benefit from the current monetary and fiscal policy that should benefit these businesses. The fact that things aren’t improving for them is of real concern – and when interest rates rise, as they inevitably will, they will find it even more difficult to service their debt.”

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