ECONOMISTS at the multi-national financial advice service PwC have issued a stark warning that nearly 30,000 businesses in the UK will collapse under the weight of high interest rates in 2024.
Company insolvencies will surge by 15% in the next 12 months according to forecasts by PwC, as corporations and small businesses go under, unable to meet the repayments on debts run up to keep them solvent.
This figure of nearly 30,000 companies going bust is greater than the number of bankruptcies experienced by the UK in the immediate aftermath of the world economic banking crisis of 2008 when around 24,000 firms collapsed.
This figure of 30,000 comes on top of the 26,000 firms that PwC expects to have been declared insolvent by the end of 2023.
Caroline Sumner, chief executive of the UK’s insolvency and restructuring trade body, said that the insolvencies in 2023 were already ‘incredibly high’ and that ‘What we appear to be looking at now is sustained volatility for the foreseeable future, where it is likely that insolvencies will remain relatively high.’
‘Relatively high’ doesn’t begin to express the collapse into bankruptcy of thousands of companies and industries that face extinction, crushed by high interest rates on the mountain of debts they have taken on, just to survive.
These debts were made available and affordable by the policies adopted by the capitalist central banks to escape the world banking crisis of 2008.
Flooding the world with paper money under Quantitative Easing (QE) programmes along with near zero rates of interest on debt drove an inflationary spiral as companies and nations tried to borrow their way out of the crisis.
In a desperate attempt to stem the spiralling inflation rate the Bank of England has attempted to reverse its previous programme by cutting back QE and driving up interest rates from the record low of 0.1% to 5.25% in two years.
Not just individual companies but capitalist nations are drowning in debt and struggling to make repayments.
The Daily Telegraph yesterday reported that Georges Ugeux, an expert in international banking and finance, was even more apocalyptic in his warnings saying: ‘I think we are in danger of a serious financial crisis that nobody talks about because of the level of debt the governments and corporations have been able to borrow at very cheap rates.’
Ugeux said: ‘There is no exit strategy. We cannot go forever in the direction we have been going.’
The main economic strategy to rescue British capitalism was the Tory hope that it could secure a trade deal with the US that would provide failing British industry with a lifeline.
US president Joe Biden scotched any remaining hope of a deal last week.
Biden has his own massive crisis trying to impose the US debt mountain on the backs of the American working class and has no interest in bailing out a British capitalist system that is diving into recession and bankruptcy.
With no economic ‘exit strategy’ from collapse, the capitalist class must impose the full effect of recession on the working class, through mass unemployment and the destruction of all the gains of the welfare state.
Savage cuts to the NHS, education, social services and benefits is the only future capitalism has to offer and this can only be achieved through using the full force of the state to smash the trade unions and make striking illegal through implementing the Tory anti-strike laws.
The powerful working class has time and again shown it is not prepared to passively accept being driven back to the conditions of the 19th century to save the bosses and bankers.
The only thing holding workers back has been the refusal of the TUC to take action against the Tories.
Workers must demand that the trade union leaders force the TUC to convene an emergency Congress in the New Year to organise the power of the working class in a general strike to bring down the Tories and bring in a workers government that will nationalise the banks and major industries, putting them under workers’ management to bring in a planned socialist economy.
Only the victory of the British socialist revolution can provide a way forward for the working class.