Rate rise puts more businesses at risk of insolvency - Crowe

03 Aug 2023

Published in: Member News

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Reaction to 0.25% interest rate rise

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Steven Edwards, Partner, Recovery Solutions, Crowe UK, said: “Today’s announcement by the Bank of England to raise interest rates to the highest levels not seen in the UK for 15 years to an eye watering 5.25% was expected, but as rates rise more UK businesses are at risk of insolvency.

“Returning inflation to below the government’s 2% target remains a stubborn challenge for the central bank and historic high interest rates is making lending more expensive and stifling investment. As business bank lending is expected to decline by nearly 4% in 2023, balancing the ongoing difficulty of affording existing debt and managing short-term cash flows with raising capital to invest remains a double-edged sword.

“Insolvency numbers in the UK are spiralling, reaching record highs with nearly a one third increase to over 2,000 appointments to distressed businesses in June compared to the same time last year, having faced waves of economic shocks with significant interest rate increases, Brexit, the highest inflation rate in the G7 and readjustment to the post-pandemic consumer environment.

“The path to growth and stability could be way off for many businesses as forecasts predict the base rate may remain high until the early part of 2024. For many, the path out of the current doldrums could be a long and weary grind and in this tough economic environment, those with the deepest pockets are likely to survive into next year.”

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About us - Crowe is a national audit, tax, advisory and risk firm offering global reach and local expertise. We are an independent member of Crowe Global, one of the top 10 accounting networks in the world. With exceptional knowledge of the business environment, our professionals share one commitment, to deliver excellence. We are trusted by thousands of clients for our specialist advice, our ability to make smart decisions and our readiness to provide lasting value. Our broad technical expertise and deep market knowledge means we are well placed to offer insight and pragmatic advice to all the organisations and individuals with whom we work. Close working relationships are at the heart of our effective service delivery. For more information, visit: www.crowe.co.uk • Follow Crowe UK on LinkedIn • Follow Crowe UK on Twitter @CroweUK Notes to editor • Background, Steven Edwards: Steven Edwards | Crowe UK • Official Government insolvency data: Monthly Insolvency Statistics June 2023 • E&Y: UK business lending to contract sharply this year as recessionary pressures intensify, but growth forecast from 2024 | EY UK • OCED inflation rates in the G7: Consumer Prices, OECD - Updated: 4 July 2023 - OECD