Small firms fear insolvency if interest rates rise

Published on 7 Jun 2010 under category: legal

Small firms fear insolvency if interest rates are to rise, a survey shows.

Talk of possible increases in interest rates has sparked fears of insolvency among small businesses in the UK.

According to a survey of 300 small firms by the insolvency trade body R3, some 18 per cent believe they would become insolvent if the base rate was increased to between four and five per cent.

For 12 per cent of respondents, bankruptcy could be triggered by a a hike to between 3.5 and four per cent, while seven per cent believe they would be at risk of insolvency after a rise to between two and 3.5 per cent.

The Bank of England base rate currently stands at a record low of 0.5 per cent, but the Organisation for Economic Co-operation and Development has called on the monetary policy to increase them to 3.5 per cent.

R3 president Steven Law said: "For businesses that are repaying loans and rely on consumer spend, an increase in interest rates would be a double blow."

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