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Debt levels soar for business as UK economy struggles to recover from Covid

Richard PartingtonMounting concern as firms borrow for ‘survival rather than growth’, figures from EY show
Britain’s economy is facing a lengthy recovery from the third coronavirus lockdown amid soaring levels of business debt after almost a year of economic turmoil caused by the pandemic.
Figures from the accountancy firm EY show British businesses took on debt at more than twice the normal average growth rate since the crisis began and are on course to have borrowed £61bn in total by the end of 2021.
Faced with prolonged lockdown restrictions at the start of the year as persistently high Covid infections delay a return to normal, EY forecast a £26bn rise in borrowing from banks this year – as much as £17bn more than in 2019.
The government announced last week that businesses struggling during the pandemic would be given more time to make repayments on state-backed loans. The new offer includes the option of paying sums back over 10 years rather than six, and allowing firms to choose to pay only the 2.5% interest. However, the scale of new debts taken on by firms could hold back Britain’s economic recovery, and lead to weaker investment if firms prioritise bringing down debt levels.
Anna Anthony, UK financial services managing partner at EY, said the “colossal amount” of borrowing was mainly being used to help companies survive, rather than to fund growth. “The prospect of some, if not many firms, not being able make the required repayments is concerning for all involved,” she said.
The warning comes as economic activity plunged in January by the most since the first wave of the pandemic. Business surveys from NatWest and the accountancy firm BDO show that tougher lockdown measures at the start of the year triggered a broad-based contraction in business activity.
Although companies remained optimistic about the outlook, reflecting progress in administering the Covid vaccine, and amid hopes for looser restrictions in the months ahead, demand for goods and services fell across the UK. NatWest said the biggest fall was recorded in Scotland, while employment levels also fell in all 12 regions of the UK monitored by the bank.
The BDO Output Index, which measures data from the UK’s main business surveys, fell to 70.44 in January, the lowest level in seven months on a scale where figures above 95 indicate economic growth. The gauge averaged 73.62 in 2020, well below the previous low of 83.28 recorded in 2009.
The government is drawing up plans for easing coronavirus restrictions in the spring that are expected to be unveiled before the chancellor, Rishi Sunak, uses the 3 March budget to announce support measures designed to kickstart the economic recovery.
However, manufacturers are preparing for a long-haul recovery, with half of firms in a survey by MakeUK expecting it would take until at least 2022 for them to return to full production capacity.
The lobby group said British industry needed support equivalent to the Marshall plan – aid paid by the US to western governments to help the economies of Europe after the second world war.
The survey of 186 industrial companies showed more than a quarter believed it would take a year or longer to return to normal trading. Stephen Phipson, the chief executive of MakeUK, said support measures at the budget and a plan for a longer-term strategic vision was needed.
Calling for the extension of the Treasury’s furlough scheme until at least September, as well as tax cuts to support business investment, he said: “We need an industrial strategy and vision on a scale not seen since the Marshall plan, which identifies new technologies and market openings that will benefit from enterprise-friendly policies on taxation, research and development, infrastructure and regional investment.”
source: Richard Partington
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BENEFIT Sponsors BuildHer...
- April 23, 2025
BENEFIT, the Kingdom’s innovator and leading company in Fintech and electronic financial transactions service, has sponsored the BuildHer CityHack 2025 Hackathon, a two-day event spearheaded by the College of Engineering and Technology at the Royal University for Women (RUW).
Aimed at secondary school students, the event brought together a distinguished group of academic professionals and technology experts to mentor and inspire young participants.
More than 100 high school students from across the Kingdom of Bahrain took part in the hackathon, which featured an intensive programme of training workshops and hands-on sessions. These activities were tailored to enhance participants’ critical thinking, collaborative problem-solving, and team-building capabilities, while also encouraging the development of practical and sustainable solutions to contemporary challenges using modern technological tools.
BENEFIT’s Chief Executive Mr. Abdulwahed AlJanahi, commented: “Our support for this educational hackathon reflects our long-term strategic vision to nurture the talents of emerging national youth and empower the next generation of accomplished female leaders in technology. By fostering creativity and innovation, we aim to contribute meaningfully to Bahrain’s comprehensive development goals and align with the aspirations outlined in the Kingdom’s Vision 2030—an ambition in which BENEFIT plays a central role.”
Professor Riyadh Yousif Hamzah, President of the Royal University for Women, commented: “This initiative reflects our commitment to advancing women in STEM fields. We're cultivating a generation of creative, solution-driven female leaders who will drive national development. Our partnership with BENEFIT exemplifies the powerful synergy between academia and private sector in supporting educational innovation.”
Hanan Abdulla Hasan, Senior Manager, PR & Communication at BENEFIT, said: “We are honoured to collaborate with RUW in supporting this remarkable technology-focused event. It highlights our commitment to social responsibility, and our ongoing efforts to enhance the digital and innovation capabilities of young Bahraini women and foster their ability to harness technological tools in the service of a smarter, more sustainable future.”
For his part, Dr. Humam ElAgha, Acting Dean of the College of Engineering and Technology at the University, said: “BuildHer CityHack 2025 embodies our hands-on approach to education. By tackling real-world problems through creative thinking and sustainable solutions, we're preparing women to thrive in the knowledge economy – a cornerstone of the University's vision.”
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