UK companies could be holding up to £105bn in unsustainable debt, warns industry body
UK companies could be holding up to £105bn in unsustainable debt, according to new analysis from financial services industry body, TheCityUK.
In a letter to the Bank of England (BoE) governor Andrew Bailey, TheCityUK said the impact of the coronavirus outbreak on business is “serious and profound”.
TheCityUK has set up a recapitalisation group to work with industry and the government to determine a collective response to the pandemic.
The body said the level of unsustainable debt held by UK companies could be between £90bn and £150bn, of which CBILs and CBILs lending could contribute up to £20bn.
The figures imply the need for firms to resolve the level of unsustainable debt “so as not to inhibit employment, research and
development, investment and, ultimately, growth.”
“We are therefore focussing on the rescheduling and
restructuring of debt to provide companies with breathing space, to raise patient capital to allow for their
rehabilitation, and to minimise the loss of productive capacity and employment,” the group said.
It added that significant new sources of funding will be required to help restore the long-term competitiveness of the UK economy.
Miles Celic, chief executive of TheCityUK, said: “The economic lockdown created by the pandemic has required unprecedented interventions. Businesses have been put into suspended animation until they can safely reopen.”
“This was absolutely the right thing to do, but it means the job is not yet done. The economy will need to be reawakened as part of its process of recovery.”
“Our industry is determined to play its part in getting the country back on its feet. Working at a pace and with real determination, firms across the industry are collaborating to identify a financially viable pathway to recovery and a return to long-term growth for UK businesses.”
Get the news as it happens by following City A.M. on Twitter.