Research conducted by QBE reveals growing concern among UK businesses about the impact of bank base rate movement, with over one in five (22%) citing interest rates as the aspect of the UK economic environment that is of most concern.

The research, conducted among 376 businesses across the UK in December last year, revealed firms’ apparent hypersensitivity to even the lowest level of interest rate rise. Nearly one in four (23%) of respondents indicate that an increase in interest rates of up to 0.5% would start to have a tangible impact on their business while almost half (47%) report that an increase of up to 1.5% would put them under pressure.

With renewed uncertainty about the timing of the first base rate increase, businesses in the UK are nevertheless steeling themselves for more pressure on their balance sheets; 48% said they would have to take a more cautious approach to spending and increase scrutiny on levels of working capital and cash flow. In addition, over one in three (36%) expect to see increased trade credit risk within their own customer base.

Trevor Williams, head of credit and surety at QBE commented: “Our research reveals a marked sensitivity among UK businesses to even the smallest increase in interest rates. In particular, companies expect their working capital and the creditworthiness of their customers to be impacted. The closing of 2014 and the first days of 2015 have seen a number of high profile business failures and profit warnings.

“Further weakening of the UK’s major trading partner, the Eurozone, coupled with downgrades of our own economic growth forecasts, demonstrate the continued fragility of the recovery,” Williams explains. “Margins continue to be squeezed and payment terms extended, leaving businesses susceptible to being starved of cash. Companies offering unsecured trade credit to their customers would be prudent to explore the benefits and protection that credit insurance can deliver.”

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