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About 28,00,000 UK busineses are expected to fold next year, as high borrowing costs put an unbearable strain on companies.
Economics consultancy the CEBR is predicting that Britain is likely to witness 7,000 business insolvencies per quarter in 2024, as the economic drops into recession.
In a new report, CEBR warns that rising interest rates and weaker demand from the cost-of-living crisis will lead to more business failures, with debt repayments hitting unsustainable levels for some businesses.
This rise in insolvencies may be indicative of a wider downturn in the economy, CEBR warns, adding: "If large investments in projects are being delayed, likely due to high borrowing costs, and businesses are collapsing, there will be impacts felt throughout the economy, from suppliers of materials to workers losing their jobs."
Firms have already gone to the wall since the Bank of England began its cycle of rising interest rates. There were 6,700 business insolvencies in Britain in the April-June quarter this year – 50% higher than before the pandemic.
Business insolvencies jumped 30% to a 13-year high of 22,000 in 2022 as government support programmes that offered companies protection from their creditors during the pandemic came to an end.
CEBR forecasts a recession in the UK, with two consecutive quarters of contraction in GDP in Q4 2023 and Q1 2024, taking the shine off last Friday’s welcome news that the economy has been stronger than thought since the pandemic.
CEBR also predicts that UK interest rates will peak at 5.75%, up from 5.25% at present, adding to the pressure on borrowers.
Yesterday, chancellor Jeremy Hunt warned that inflation may increase this month, in a “blip”, as new data shows petrol and diesel prices rose last month.
Budget airline Ryanair has revealed that over 60,000 of its customers saw their flights cancelled during last week’s air traffic control chaos.
Ryanair reports this morning that more than 350 flights were cancelled on August 28 and 29 – Monday and Tuesday last week – due to the air traffic control (ATC) failure, impacting 63,000 of its passengers.
The Irish carrier said the ATC failure – which caused widespread travel disruption last week and left passengers stranded – “has still not been explained”.
Ryanair carried 18.9 million guests in total last month, up 11% on a year earlier, it added.
The automatic flight planning system used by Nats, the company that provides national air traffic control services in the UK, was out of action for several hours on Monday.
Airspace was not closed, but the number of planes in the sky was severely restricted while the automated system was down.
Last week, Ryanair’s CEO Michael O’Leary blasted air traffic services for its lack of communication over the outage.
Nats says that the failure was triggered by a single piece of data in a flight plan that was wrongly input to its system by an unnamed airline. Willie Walsh, the director general of the global airlines body, Iata, said it was “staggering” that inputting a single flight plan incorrectly could knock the whole system over.
The agenda
• 7am BST: German trade balance for July
• 8am BST: Switzerland’s Q2 2023 GDP report
• 2pm BST: Bank of Israel sets interest rates
• 2.30pm BST: ECB’s Christine Lagarde speech at European Economics & Financial Centre
We’ll be tracking all the main events throughout the day ... |
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