A report from EY Item Club suggests net borrowing by UK companies is expected to be more than five times higher this year than in 2019. With the coronavirus crisis driving firms to take loans as revenues and cashflow took a hit, banks had issued £43.2bn up until August, far exceeding the £8.8bn borrowed in the whole of last year.
The report predicts that most businesses will only start repaying this debt and cut borrowing from 2022.
EY’s Omar Ali comments: “Banks are facing squeezed interest margins, slow growth in consumer credit and increased write-offs on loans. ” EY predicts that banks will have to write off 2.5% of loans to consumers next year - up from 1.3% this year