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Bank of England's interest rate cuts will be too late for thousands of companies

The Bank of England and the Government have not yet decided whether to launch a digital pound (Aaron Chown/PA) (PA Wire)
The Bank of England and the Government have not yet decided whether to launch a digital pound (Aaron Chown/PA) (PA Wire)

Today’s numbers from the Insolvency Service make sobering reading.

We still do not know whether or not the British economy slipped into the mildest of recessions in the second half of last year.

We will not get confirmation of that until February 15 with the fourth quarter GDP data. But either way what we do now know is that last year’s grim harvest of corporate failures was the worst since 1993.

The official figures out today show there were 25,158 company insolvencies in 2023. The headline total was the highest for 30 years, although the larger number of businesses in the economy now means that the rate of failure was “only” the worst since the financial crisis a mere decade and a half ago.

It is a number that should be front of mind when the Monetary Policy Committee meets this week to decide its next move on interest rates.

Every one of those failures represents jobs lost, suppliers and other creditors left unpaid and a toll of human misery that in many cases can be directly linked to the high level of borrowing costs over the past two years.

Yet the MPC is almost certain to leave things as they are on Thursday. Other figures out today from analysts Kantar show food inflation stopped falling this month.

That follows the surprise rise in inflation in November and continuing strong wages data likely to be stoked further by the 9.8% rise in the minimum wage in April.

The rate cut lifeline will not come until May at the earliest and possibly later than that. In the meantime companies that feel they have been battered by endless waves of setbacks since Covid first hit in February 2020 will have to hold on just a little bit longer.

So the first half of 2024 is likely to be another six months when mere survival is the name of the game for thousands of companies that have been doing no better than keeping the administrators at bay since the pandemic.