Bank rates: a case of good news, bad news

Rising interest rates are bad news for homeowners - but they could be a lifesaver for some meat businesses, according to leading commercial analyst

Plimsoll Publishing.

"Our research shows a third of UK meat companies are in more debt than they have been at any time in their history," said David Pattison, senior analyst at Plimsoll. "Rising rates are a useful wake-up call.

"Many companies have been enticed by low interest rates and the lure of easy debt, secured on rapidly rising property prices, so have been able to cover up flaws in their business strategies - simply buying time. There is just enough time left for these firms to look seriously at their balance sheets and change direction."

Plimsoll is advising companies to reduce their level of debt and streamline their business models if they want to have a future. But if they ignore the alarm call they risk sleepwalking into danger.

Pattison said rising rates should also bring stability to the UK meat market because they will slow down the pace of acquisition activity. While this is unlikely to affect deals already on the table, companies with some money in the bank will probably leave it there, in the shorter term at least.

He said this may be bad news for smaller firms hoping to sell out to the bigger players, but it is good news for those fearing a hostile takeover.

The companies in the danger zone, however, may see themselves joining a wave of high-profile distress sales as the banks tighten their books - unless they take action now, before the Bank of England announces further rises.

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