Planning for the future amid interest rate uncertainty

Restructuring and Insolvency

A general election looming, wars in Ukraine and Gaza…it’s a volatile mix that can have an unpredictable impact on interest rates.

While a rise in rates might be welcomed by domestic savers, though, it will not be such good news for business still emerging from the problems left by the pandemic.

Insolvency expert Adrian Graham, from Leonard Curtis Sheffield, warns that any increase in interest rates could have a major impact on business borrowing.

“Any rise in rates means a rise in the cost of borrowing that can have wide spread consequences,”  he said.

“Higher interest rates mean higher mortgage rates, which in turn mean people have less money to spend, having an immediate impact on areas like the hospitality sector and retail, both of which are still finding a way through the impact of  the pandemic.

“But in all areas of industry, any increase in the cost of borrowing can have a crippling effect for businesses already struggling to pay for the essentials like heating, lighting and wages.

“Company insolvencies reached their highest annual level in 30 years in 2023 and the final three quarters of that period also saw the highest quarterly number of Creditors Voluntary Liquidations since data was first recorded in 1960.”

Adrian added that the current climate, both at home and internationally, makes it increasingly difficult to predict which way interest rates will go, making it essential for businesses to have some sort of plan in place to lessen the impact of any looming financial crisis.

“Businesses who are borrowing funds need to make sure the terms are affordable and can be sustained long term in the face of any challenges,” he said.

“Cash flow should be reviewed regularly, sales invoices should be raised and paid on time - with particular attention to keeping HMRC payments up to date - and supplier costs should be continually reviewed.

“It continues to be a tough environment for all areas of the business community and that means taking a robust approach.

“Don’t be afraid to chase for payment because customers who don’t pay are not the right customers.

“And above everything else, do not be afraid to seek advice because simply avoiding a crisis and pretending it isn’t happening is the one guaranteed way to ensure the crisis gets worse.”

To find out more about the full range of services provided by the Sheffield office of Leonard Curtis call 0114 285 9500.


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