News Column

Rate hike may cost firms over £2bn per year

July 28, 2014

JULIAN HARRIS



A ONE per cent rise in interest rates would cost UK firms over 2bn per year, a firm of accountants warns this morning.


With the British economy set to grow by more than three per cent in 2014, the Bank of England is increasingly expected to lift rates from their historical low of 0.5 per cent.


Many economists have said that a tightening of policy will lead to many so-called zombie firms - companies relying on cheap credit - going out of business.


But even companies in stronger positions need to beware, says Michael Finch of Moore Stephens, which conducted the new research.


"Businesses need to be realistic and start budgeting for a higher cost of debt now so that they are not caught out when interest rates do go up," Finch said.


"Rising interest rates would also have a huge impact on UK individuals, with approximately an extra 7.6bn in borrowing costs in the next year if interest rates increase by one per cent," the company added.


The Bank of England's next inflation report is expected to hint at when a rise may come.


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Source: City A.M. (UK)


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