Low interest rates offering SMEs a lifeline

Many firms continue to survive solely due to the lifeline offered to them by low interest rates which could put many out of business once removed.

Neil Hughes, managing partner of financial services firm Hughes Blake, urged policymakers to come up with a plan to limit the impact of inevitable rate increases and save as many small- and medium-sized firms as possible.

When rate increases are introduced, legacy debts and high rents will become a much larger burden to bear.

“Looking to the future, it is not a question of if these rates will move back up, but when. And when it does happen, SMEs with fundamental issues such as these will be faced with insolvency and we, as a country, need to put a plan in place to ensure that as many of those companies as possible are saved,” Mr Hughes said.

The warning came as examinership figures point towards an economic improvement.

New data from the Hughes Blake SME Examinership Index released today shows fewer firms are being forced into examinership.

This improvement is reflected in the falling number of SME jobs saved by the process to date this year, with 871 positions protected compared to 1,089 to the end of September 2014. Some 168 jobs were saved in the third quarter.

“On the face of it that’s a positive development, but proactive measures are needed if we are to ensure that small and medium businesses don’t just survive, but are in a position to thrive,” Mr Hughes said.

While the financial positions of many companies has picked up, years of cost-cutting has hampered growth and left firms in a precarious position.

Just 1% of potentially viable businesses look to restructure through examinership, compared to 22% in the US.