Rising interest rates could see an average of 7,000 businesses going bust every quarter in 2024, warns the Centre for Economics and Business Research (CEBR).
High interest rates, unsustainable business debt levels and the cost of living could result in 28,000 business closures in 2024 - nearly double the pre-pandemic level.
In 2020, CEBR had warned about businesses taking on debt during the pandemic to survive. WIth the Bank of England's bank rate increasing from 0.1% in December 2021 to 5.25% today, the cost of debt is adding pressure to finances and deterring investment.
There were over 6,700 business insolvencies in the UK in the second quarter of 2023, more than double what was seen in a typical quarter during the pandemic.
Insolvencies were 50% higher than the same quarter pre-pandemic in 2019, averaging 4,100 every quarter between 2015 and 2019.
Commenting on its findings, the CEBR said:
"In line with our forecast of a recession, we may see the Bank of England start to cut interest rates next year, in an attempt to restimulate demand.
"However, even if the Bank starts to reduce its base rate, interest rates will still stand far above recent norms for some time. As such, a recovery in businesses' willingness to invest may take some time, meaning a tricky trading period until then."
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