Interest rate rises yet again

Sadly members of the MPC are clearly not reading our opinion pieces and considering what effect the rate increases are having on the majority of the population and business owners.

This latest 0.5% increase comes as the Insolvency Service statistics for November showed a 21% increase in total corporate insolvencies compared to November 2021. We are at a loss to understand how this latest rate increase makes sense against these insolvency stats – but hey we are merely IPs not MPC members!

There were five times as many compulsory liquidations in November compared to last year, which tells us that the banks and other lenders are taking a very hard line when companies are struggling, giving credence to our view that directors need to seek advice.

Reading the Bank’s own publication ‘Agents' summary of business conditions - 2022 Q4’ adds to our confusion with the following headlines contained within the report:

‘The squeeze on real household incomes continued to weigh on consumers’ demand for goods and services.’

‘Manufacturing output fell compared with a year ago, reflecting weak demand for retail and construction products.’

‘Construction output fell as home renovations declined sharply and commercial development weakened.’

‘Companies paused or reduced their investment plans due to weak demand, tighter financial conditions and uncertainty about the outlook. This was particularly the case for consumer services firms.’

‘Credit availability tightened as credit risk increased due to the weaker economic outlook. Demand for credit also fell.’

‘Companies expect to keep headcount flat over the coming year, suggesting that the labour market has started to loosen.’

‘Input cost inflation remained elevated, but it was becoming more difficult for companies to increase prices, so profit margins continued to be squeezed.’

‘Housing market activity continued to cool, and development and transaction activity for commercial property remained weak.’

None of these statements are a surprise to us and when you add in the additional tax burden, which is even greater for those living in Scotland, and we believe that this latest base rate increase will be the final straw for a host of businesses across all sectors.

So what exactly are we missing? Why on earth does the MPC think this latest rate increase will help against the worrying set of statements from their own research?

We would love to hear your views.

As we have said many times before – and will continue to say - all we can do is to urge company directors worrying about their finances to seek professional advice.

If you are involved with, or know of any business or individuals that are struggling financially we suggest that you talk to us.

The directors of SKSi look at a formal insolvency process as the last resort – not the first. It is their long held belief – borne out with proven experience – that seeking advice at the first sign of financial pressures will lead to a more favourable outcome. Conversely, doing nothing and hoping the problem will go away is far more likely to lead to a call form the bank and an insolvency process.

We are always available for an initial zero cost assessment which can be arranged by contacting Alistair Dickson.