A report published by management consultancy Baringa at the end of May suggested that UK firms face the largest-ever increase in debt-driven costs between now and the end of 2026.
Analysis of data on UK corporate bonds and loans to determine how much would be due if debt was refinanced at the interest rates now predicted for the time it matures found that firms would pay an additional £5.9 billion to service their debt this year, rising to £7.2 billion in 2026.
Almost all the 250 chief financial officers, treasurers and financial directors surveyed for the report said they were facing or expecting to face an increase in the cost of refinancing, with 72% describing the increase as ‘significant’.
According to Jackie Bowie, managing partner and head of Europe, Middle East and Africa at Chatham Financial, firms should be exploring all options including alternative financing routes such as private credit.
“If possible, play the different sources of financing against each other,” she says. “Work on improving credit ratings, if possible, to secure lower cost of debt and explore ways to lower the debt cost on existing financing, for example through basis swaps on Euribor debt.
