Yahoo Finance British companies face highest borrowing costs on record
Britain’s biggest companies are facing record borrowing costs as Kwasi Kwarteng’s debt-funded tax cuts continue to wreak havoc across financial markets.
Blue-chip companies that raise money by issuing bonds face record refinancing costs after the Chancellor doubled down on his fiscal plans, fuelling speculation that the Bank of England will be forced to accelerate interest rate rises.
The difference in the interest rate that investment-grade companies need to pay if they issue sterling bonds now compared with the rate on existing debt climbed to 3.25pc, according to Bloomberg data.
This represents the highest ever refinancing cost for British companies since the metric was first tracked more than 20 years ago, even exceeding the previous high reached in the aftermath of the 2008 financial crisis.
It means that companies would have to pay an additional £3.25m for every £100m they borrow at a time when they are already facing increased costs from spiralling energy bills.
It comes as pressure continues to grow on Liz Truss’ government and the Bank of England over Mr Kwarteng’s mini budget last Friday.
Lord Stuart Rose, the veteran retail executive and Conservative peer, criticised the Government’s handling of last week’s fiscal announcement.
He told BBC Radio 4's Today programme: “I think we're in a jam, pickle and stew. What business hates most of all is uncertainty and what we've got now is rather more of uncertainty. I think we do not have the full picture. Businesses like to see the full runway.”
Lord Rose added that it was "not necessary" to cut the top rate of tax "at this particular time".
Last November, Threadneedle Street published a report that said that it would take a 4pc increase in borrowing costs for UK debt servicing costs to be an area of concern for the wider economy, with over 60pc of companies spending 40pc of their income on interest payments.
Since then, the average rate of interest on high-grade sterling bonds has jumped 5pc, while an index of junk-rated sterling debt has climbed 6.5pc.
