STEPHEN Welton, head of the small business investors group the Business Growth Fund (BFG), warned this weekend that the UK economy is in the middle of a ‘perfect storm’ of bankruptcies and insolvencies that could ‘materially affect the economy for generations.’
The BFG was created by the UK’s biggest banks in the wake of the financial crash in 2008 to ‘rescue’ companies facing collapse.
Welton spelt out the prospect of a massive crash lasting not just for a year or two but for generations to come saying that the record amount of debt run up by companies means:
‘We’re going to face the perfect storm of company failures, so increasing insolvencies and unemployment, combined with zombie companies that can survive but are just surviving to pay interest.’
He added: ‘Those two together will completely handicap the economy in terms of its ability to recover.’
Corporate debt is the sword hanging over these companies with the thousands of so-called zombie companies just managing to keep from plunging into bankruptcy through acquiring more and more debt in order to pay off the interest on their existing debt.
It has been estimated by the City UK Recapitalisation Group that unsustainable corporate debt in the UK will reach £70 billion in spring next year.
Of this, over £40 billion has been handed out by the banks under the Tory Chancellor Rishi Sunak’s Government Support Scheme – bounce back loans.
This guaranteed that the government would repay the banks if these support loans turned bad with companies collapsing and unable to repay. If the vast majority of UK companies are drowning in debt the same is true of the entire capitalist economy.
Last week, Sunak was forced to extend the furlough scheme for workers laid off by the coronavirus pandemic and the latest partial month-long lockdown until March next year.
This means the government paying 80% of the wages of furloughed workers at the cost of £1 billion a month for every one million people laid off. The total bill will run into tens of billions – on top of the £210 billion the Tories have spent in the first six months of this year alone.
This helped push the government debt to over £2 trillion with the UK’s overall national debt standing at 103% of the annual national income as measured by the country’s Gross Domestic Product (GDP).
In short, the UK economy is a nothing more than zombie capitalism existing solely through running up a mountain of debt that will have to be repaid or declare itself bankrupt just like the zombie
The extension of the furlough scheme was forced on the Johnson government because at this stage they are not confident of taking on the working class directly by allowing millions to be thrown out of work and imposing the most savage austerity cuts to make workers pay for this massive debt.
But this situation cannot continue indefinitely or British capitalism will be forced into state
Already the Tory Party is split, with more and more MPs denouncing lockdown and insisting that the only way to ‘save’ British capitalism is to end furlough, reopen the economy and let all the deadwood companies collapse so that a few might survive the inevitable crash into recession.
While the capitalist class prepare for the day of reckoning and an all-out war against the working class, the leaders of the trade unions have lined up behind Sunak welcoming his furlough extension as some kind of triumph and refusing to warn or prepare the working class for the inevitable day of reckoning when all this debt mountain will have to be paid for by workers and their families.
These leaders are deliberately attempting to hold back the anger of the working class against a capitalist system that cannot be reformed but must be overthrown.
The only way forward is to kick out these trade union leaders and replace them with the revolutionary leadership of the WRP that is prepared to mobilise the full strength of the working class in mass strike action to bring down the Tories and advance to a workers’ government and socialism.