As we continue the phased coming out of lockdown and business of all shapes and sizes can take the further tentative post lockdown steps to ‘normal’ business, it is worth reflecting sombrely on the damage to the UK economy, businesses and the levels of debt that have accrued at national, organisational and individual levels as a result of the pandemic and the potential impact such levels of debt will continue to have.
The latest research suggest that businesses and corporate loan defaults have doubled in the last year, and that businesses across The United Kingdom and Europe face a tsunami of £1.5 trillion of debt due to mature over the next four years or so, with businesses across The UK and EU facing the very real risk of going under.
In 2021 alone it is estimated that some £250 billon plus will be seen; and such levels of debt will only be exacerbated as state aid and support is withdrawn and bond yields rise.
Rating Agency S&P revealed that the UK and European default rate for February 2021 was %5.4, more than double the previous year, with retail, hospitality and leisure being biggest hit.
Despite short term favourable borrowing environments allowing some to financially restructure, factors such as the speed of aid and support withdrawal, interest rate and bond yield rises could catastrophically exacerbate current levels of business indebtedness and in turn reverberate upon the economy and jobs.
With The UK’s debt burden – at 97.5% of GDP in February 2021 and borrowing of £19bn in February – being the highest since the 1960’s, the UK economy is potentially fragile and precarious.
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