Quarter of UK Businesses Not Prepared for Rise in Bank Interest Rates
Majority of companies preparing for a rise in interest have factored a rise of only .25%
Research shows that 26.5% of UK businesses have not factored the rise of bank interest rates into their financial planning.
The report, which was commissioned by Company Watch and consisted of 500 UK businesses, revealed that of those businesses that have factored interest rate rises; the biggest group at 40% are prepared for an increase of just .25%, followed by 30% who are predicting a .75% rise and finally 25% are factoring a .5% rise in their business’ financial plan.
The survey, which was conducted by market research group OnePoll, also asked correspondents how they planned to cover increased charges. While 70% are currently in discussion with banks to lock-in current debt terms, 30% stated that they would consider changing lender to manage increased costs.
Over half said they would try to cover the charges by increasing sales and a third plan to cut costs within the business to deal with the increase. Finally, only 3% confirmed they would allow the cost to transfer onto the business’ customers.
Bank interest rates, which have been kept low since 2009, are currently at .5% but are predicted to start rising from next year. Of the companies that are preparing for an increase, the vast majority were preparing for higher rates from June 2015, with 26% preparing for an increase for before January 2015.
Director of Company Watch, Emma Caister, addressed the results and emphasised the importance of companies planning for how the rises will effect them and the wider circle that influence their business:
“Clearly with many companies in the Company Watch survey still feeling the effects of the long recession, even a small increase in debt costs might end up having a big impact on the strength of their businesses.
“We believe it’s sensible for companies to understand not only what higher interest rates might do to their own businesses, but also to examine what the impact might be on the financial health of their main suppliers and customers.”
Take a look at our budgeting guide to help you get your business prepared for the future.