A WAVE of companies across the UK and the rest of Europe will be forced into bankruptcy as new figures show that the default rate on corporate loans has doubled.
According to S&P Global ratings data provided to the Daily Telegraph, businesses across the UK and Europe are up to their necks in a £1.5 trillion debt mountain that is due to mature in the next four years.
£245 billion of this debt is due to mature this year, meaning that it will have to be paid off immediately over the coming months with more and more companies driven to default and bankruptcy.
According to the S&P data, the default rate for companies in the UK and Europe was running at 5.4% in February – twice the rate in February last year before the coronavirus lockdowns.
What these figures show is, that throughout the past year, companies that exist solely through debt have carried on gorging themselves on loans at ultra-low interest rates along with the billions handed out by governments across Europe and the UK in the form of government support bail-outs during the pandemic.
According to the Telegraph: ‘Companies have looked to take advantage of ultra-low interest rates and government loan schemes to push out the risk of debt. But City analysts warned that high indebtedness could weigh on the economy’s recovery and predicted a pick-up in defaults if government support is withdrawn prematurely.’
This warning was echoed by Daniel Grosvenor, director of equity strategy at Oxford Economics, who told the Telegraph that although there is a ‘limited near-term risk’ to a wave of companies and businesses going bust and collapsing into bankruptcy ‘many companies are likely to struggle if policy support is withdrawn too quickly’.
In other words, the only thing standing between a wave of corporate bankruptcies across the UK and Europe is governments printing trillions more currencies to hand out in ‘support’, and ultra-low interest rates carrying on forever.
Unfortunately for these ‘zombie’ companies, that survive purely on debt and now dominate capitalism internationally, both these supports are set to come to an end very soon.
In Britain, the Tory government has been forced to borrow massive amounts just to keep these companies afloat. The UK national debt soared to a staggering £2.13 trillion in February with the Tories borrowing £19.1 billion in that month alone.
Tory chancellor Rishi Sunak is determined to cut this burgeoning national debt by ending the furlough support scheme completely in September this year at the same time ending the £20 a week temporary increase in Universal Credit.
The Tories are preparing for an increased austerity war against the working class as thousands of businesses and corporations close down when this support ends, and millions of workers are thrown on the scrapheap of unemployment.
This crisis will hit very soon, as all these companies and corporations that have survived entirely on debt find they will have to pay-up when the debt matures in the coming months, as the S&P analysis has revealed.
Across Britain and Europe capitalism is entering a new Great Depression dominated by mass unemployment and inflation spiralling out of control, driving millions of workers into poverty and destitution not seen since the Depression of the 1930s which followed the financial crash of 1929.
The working class will not accept being driven back to those conditions of the Hungry 30s by a capitalist system that is collapsing into bankruptcy from which it has no escape.
The only way forward for the working class is to prepare and organise to put an end to this bankrupt capitalist system once and for all by overthrowing it and bringing in socialism.
In Britain it means building the Workers Revolutionary Party, and a general strike to kick out the Tories and advance to a workers’ government that will expropriate the bankrupt capitalist class, nationalise the banks and industry placing them under the management and for the benefit of the working class.
Socialist revolution is the only way forward for the working class today.