Yet more concerning information about the struggling UK retail sector. The value of UK retailers’ overdrafts has jumped by 33% from £8.2bn to £10.9bn in the last year alone, says Hadrian’s Wall Capital (HWC), a London-based specialist debt adviser.
HWC says that as the retail sector struggles, banks may be trying to ensure that as much of retailer borrowing as possible is short-term and repayable on demand.
Overdrafts allow banks to call in the debt at short notice if they are concerned that a borrower may be heading towards insolvency, rather than having to wait in line with other creditors if the business closes.
Overdrafts are part of an overall trend of banks limiting their commitment to long-term and fixed-rate lending, and moving business borrowers to short-term, floating rate loans. This trend may partly be driven by banks seeking to manage the risk of their loan books, and their exposure to rising interest rates.
HWC says that a recent study by it found that just 11% of the £416bn in total stock of loans to businesses is now being provided on a fixed rate, down by a third from 18% just two years ago, and 49% in 2012.
The trend in rising business overdrafts is being seen across the economy – the total value of overdrafts rose 17% from £41.3bn to £48.4bn in the last year – although it has been much more pronounced in the retail sector.
Marc Bajer, HWC Chief Executive Officer, comments: “Banks appear to be keeping struggling retailers on a very short leash. As the retail sector faces strong headwinds, banks appear to be encouraging retailers into short-term debt.”
“Having retailers borrow more on their overdrafts, rather than through term loans, means the banks can call in the debt if they get nervous.
“It’s understandable that the banks want to protect their interests, but it gives businesses very little certainty over their borrowing, and makes it difficult for them to plan for the future.
“Businesses need access to fixed-rate and long-term lending if they are to invest and grow, or if they want to make acquisitions. It is something that the banks seem to be increasingly reluctant to provide.”
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Retailer overdrafts jump by a third
Yet more concerning information about the struggling UK retail sector. The value of UK retailers’ overdrafts has jumped by 33% from £8.2bn to £10.9bn in the last year alone, says Hadrian’s Wall Capital (HWC), a London-based specialist debt adviser.
Retailer overdrafts jump by a third
Yet more concerning information about the struggling UK retail sector. The value of UK retailers’ overdrafts has jumped by 33% from £8.2bn to £10.9bn in the last year alone, says Hadrian’s Wall Capital (HWC), a London-based specialist debt adviser.
Overdrafts allow banks to call in the debt at short notice if they are concerned that a borrower may be heading towards insolvency, rather than having to wait in line with other creditors if the business closes.
Overdrafts are part of an overall trend of banks limiting their commitment to long-term and fixed-rate lending, and moving business borrowers to short-term, floating rate loans. This trend may partly be driven by banks seeking to manage the risk of their loan books, and their exposure to rising interest rates.
HWC says that a recent study by it found that just 11% of the £416bn in total stock of loans to businesses is now being provided on a fixed rate, down by a third from 18% just two years ago, and 49% in 2012.
The trend in rising business overdrafts is being seen across the economy – the total value of overdrafts rose 17% from £41.3bn to £48.4bn in the last year – although it has been much more pronounced in the retail sector.
Marc Bajer, HWC Chief Executive Officer, comments: “Banks appear to be keeping struggling retailers on a very short leash. As the retail sector faces strong headwinds, banks appear to be encouraging retailers into short-term debt.”
“Having retailers borrow more on their overdrafts, rather than through term loans, means the banks can call in the debt if they get nervous.
“It’s understandable that the banks want to protect their interests, but it gives businesses very little certainty over their borrowing, and makes it difficult for them to plan for the future.
“Businesses need access to fixed-rate and long-term lending if they are to invest and grow, or if they want to make acquisitions. It is something that the banks seem to be increasingly reluctant to provide.”
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