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Rising interest rates could cause an average of 7,000 businesses to go bust every quarter in 2024, the Centre for Economics and Business Research (CEBR) has warned.
The CEBR believes that as many as 28,000 businesses could close next year – nearly double the pre-pandemic level – due to high interest rates, unsustainable business debt levels and the ongoing cost-of-living crisis.
In 2020, the CEBR had warned on businesses taking on debt to survive the pandemic. This was due to the Bank of England increasing its rate from 0.1% in December 2021 to 5.25% in present day, which added pressure to finances and deterred investment.
The second quarter of 2023 saw over 6,700 business insolvencies in the UK, more than double what was seen in a typical quarter during the pandemic.
Meanwhile, insolvencies were 50% higher than the same quarter pre-pandemic in 2019, averaging 4,100 every quarter between 2015 and 2019.
A spokesperson for 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.”
