Al Mayadeen English

  • Ar
  • Es
  • x
Al Mayadeen English

Slogan

  • News
    • Politics
    • Economy
    • Sports
    • Arts&Culture
    • Health
    • Miscellaneous
    • Technology
    • Environment
  • Articles
    • Opinion
    • Analysis
    • Blog
    • Features
  • Videos
    • NewsFeed
    • Video Features
    • Explainers
    • TV
    • Digital Series
  • Infographs
  • In Pictures
  • • LIVE
News
  • Politics
  • Economy
  • Sports
  • Arts&Culture
  • Health
  • Miscellaneous
  • Technology
  • Environment
Articles
  • Opinion
  • Analysis
  • Blog
  • Features
Videos
  • NewsFeed
  • Video Features
  • Explainers
  • TV
  • Digital Series
Infographs
In Pictures
  • Africa
  • Asia
  • Asia-Pacific
  • Europe
  • Latin America
  • MENA
  • Palestine
  • US & Canada
BREAKING
Al Mayadeen's correspondent in South Lebanon: US envoy Tom Barrack cancels his visit to Tyre and al-Khiam amid popular protests
Al Mayadeen's correspondent in Lebanon: Israeli occupation forces carried out an explosion in the southern border town of Kfar Kila
Russian Ministry of Defense: 37 Ukrainian drones destroyed in 4 hours over regions of Russia and the Black Sea.
Sheikh Qassem: Our supporters make up more than half of Lebanon's population, and all of these people are united under the banner of protecting Lebanon, its Resistance, its people, and its integrity.
Sheikh Qassem: There will be no phased handing in of our arms. [The Israelis] must first enact the agreement before we start talking about a defensive strategy.
Sheikh Qassem: Be brave in the face of foreign pressures, and we will be by your side in this stance.
Sheikh Qassem: Stripping us of our arms is like stripping us of our very soul, and this will prompt us to show them our might.
Sheikh Qassem: We will not abandon our arms, for they gave us dignity; we will not abandon our arms, for they protect us against our enemy.
Sheikh Qassem: The US efforts we are seeing are aimed at sabotaging Lebanon and constitute a call for sedition.
Sheikh Qassem: If you truly want to establish sovereignty and work for Lebanon’s interests, then stop the aggression.

Small UK businesses exposed to higher risk of bankruptcy

  • By Al Mayadeen English
  • Source: Agencies
  • 30 Oct 2022 12:13
  • 2 Shares
5 Min Read

The mismanagement of the economy and the high cost of borrowing is pushing smaller UK firms to the brink of bankruptcy.

  • x
  • Small UK businesses exposed at higher risk of bankruptcy
    Small UK businesses exposed to higher risk of bankruptcy

As economists are predicting the prospects of a recession looming ahead for the bearish British economy, the hike in interest rates is putting many UK businesses at risk of bankruptcy, The Telegraph reported on Sunday.

The situation is dire. Aston Martin Lagonda, one of the UK's most prestigious auto companies, is beginning to allow investors to buy shares as low as £103 in a bid to alleviate crippling debt costs. Morrisons which was acquired by Clayton, Dubilier & Rice in October 2021, doubled its debt from £3.2bn in January 2021 to £6.8bn a year later.

Although Moody's estimates that the company has enough finances to pull through the debt, a one percent increase in interest will cost Morrisons £30m a year in extra fees, which is likely to impact shares of the firm.

The Central Bank clearly knows things will get harder for companies that face high indebtedness and difficult capital markets.

"Those who need to refinance will be most at risk given the step-up in funding costs," said Richard Etheridge, Associate Managing Director at Moody’s.

A team of analysts at S&P Global Ratings said in the year 2022 alone, interest rates across the world have increased at a pace faster than at any time in the past four decades, adding that if central banks of the EU and the UK were to raise their interest rates and energy prices kept rising, it would "accelerate defaults quickly."

Analysts say that "zombie" companies, which are firms that survive debt by paying low-interest rates, will potentially have to face retribution as the main focus of rating agencies lies on bigger firms. 

Unlike smaller companies, bigger companies can issue bonds and stocks but the high cost of bank loans remains a matter of serious concern for smaller companies. 

Daryn Park, senior policy advisor at the Federation of Small Businesses, said, "If interest rates hit 6%, it will start to price out a lot of businesses."

According to a survey of FSB members, one in five small companies which applied for loans in Q3 failed to find an offer at an interest rate below 11%.

Consequences are even more severe for smaller businesses that depend on bank loans to invest in growth. "If we’re heading towards a tightening market, they are not going to be able to grow," Park said.

Read more: Rishi Sunak promises to restore UK economic stability

According to Norman Chambers, managing director of the National Association of Commercial Finance Brokers, the coming six months are expected to increase "distressed borrowing" from companies in need of emergency funds, adding that brokers, which act as mediators between companies and banks, should "lengthen loan terms and consolidate where possible."

Related News

CNBC unveils strategic plan to revitalize Syria energy sector with US

Syria to sign deal to import electricity from Turkey, minister says

But the banking sector hasn't shown much concern over the matter.

UK Finance, the banking industry’s lobby group, said in September there persists a "high degree of financial headroom across SMEs, and lenders continue to stand ready to support businesses."

Katie Murray, finance boss at NatWest Group, said on Friday that "loan impairments remain extremely low," though the bank did recognize that it was foreseeing increased credit risk among its customers.

Stephen Pegge, managing director for commercial at UK Finance, acknowledged that there were tough times ahead for the UK economy but said the share of debtors is the same as it was prior to the pandemic.

"Banks have been stress-testing whether businesses can afford higher interest rates for some time," he said. "That gives me confidence that things could be OK."

In a report issued last year by the Central Bank of England, it was reported that an increase in borrowing costs of about four percent would "markedly increase the share of businesses with a high debt-servicing burden."

But these remarks were issued when the bank base rate stood at 0.1%.

Now that the rate has increased to 2.25%, with further increases anticipated, increases of four percentage points in borrowing costs are more possible than ever.

The study also suggested that the weight of the burdens would be containable if wages decreased but did not consider alternative scenarios in which sales would fall as interest rates soar.

Louise O’Sullivan, director at Interpath Advisory, a debt and restructuring consultancy, said the pace of interest rate rises had "taken a lot of people by surprise."

When interests were still at a low rate, businesses became laxed on protecting against interest rate risk.

But it is now clearly too late to take preventive measures.

Sandra Kylassam-Pillay, who is also a director at Interpath, said, "It’s not the increase in interest rates in isolation that is affecting corporates at the moment," adding that "it’s also inflation and the cost of living – all of that means businesses are under increased stress."

Read more: Unite or die: Rishi Sunak to fellow Tories amid economic challenges

  • Energy crisis
  • Bank of England
  • UK
  • Recession

Most Read

Almost instantly after the Helsinki Accords were signed, organisations sprouted to document purported violations, whose findings were fed to overseas embassies for international amplification. (Al Mayadeen English; Illustrated by Zeinab el-Hajj)

How ‘Human Rights’ became a Western weapon

  • Opinion
  • 23 Aug 2025
Israeli soldiers stand on the top of armoured vehicles parked on an area near the Israeli-Gaza border, as seen from southern Israel, Wednesday, Aug. 20, 2025 (AP)

Palestinian fighters target Israeli soldiers, vehicles in Gaza

  • Politics
  • 21 Aug 2025
Launch of a ballistic missile from Yemen toward the occupied Palestinian territories. (YAF military media)

Yemeni Forces announce firing hypersonic missile at Al-Lydd Airport

  • Politics
  • 22 Aug 2025
The ‘Arab Façade’ for Israeli occupation in Gaza

The ‘Arab Façade’ for Israeli occupation in Gaza

  • Opinion
  • 23 Aug 2025

Coverage

All
The Ummah's Martyrs

Read Next

All
A scene showing an al-Qassam Brigades fighter during an ambush on July 7, 2025, in a video released by the al-Qassam Brigades on August 26, 2025 (al-Qassam Brigades Military Media)
Politics

Al-Qassam reveals Beit Hanoun ambush targeting Israeli forces

A Palestinian youth stands on a hill overlooking IsraelI Ofer Prison, near the West Bank city of Ramallah, Wednesday, July 3, 2024. (AP)
Politics

77 Palestinian prisoners killed in Israeli prisons since October 7

US Ambassador to Turkey and Special Envoy to Syria Tom Barrack speaks during a joint press conference with US deputy special envoy for Middle East peace Morgan Ortagus at the presidential palace in Baabda, Lebanon, Tuesday, August 26, 2025 (AP)
Politics

US envoy Barrack calls Lebanese journalists 'animalistic"'

Tom Barrack's imperial tantrum in Beirut: When entitlement speaks (Photo by Mahdi Rtail)
Politics

Tom Barrack's imperial tantrum in Beirut: When entitlement speaks

Al Mayadeen English

Al Mayadeen is an Arab Independent Media Satellite Channel.

All Rights Reserved

  • x
  • Privacy Policy
  • About Us
  • Contact Us
  • Authors
Android
iOS