New report unveils £390.7 billion of debt for UK listed companies

Borrowing reduced during the ‘Credit Crunch’ with firms cutting borrowing by 1/5 in only 2 years, but figures have now soared with UK company debts totting up at £390.7 billion – a report by Link Asset Services showed.

Companies have felt pressure to increase borrowing – during a time when profitability has decreased and bottom lines are tighter in order to keep company directors and shareholders happy with unparalleled dividend payments – with a figure cited as £263 billion paid out to shareholders.

The report revealed that the oil sector oil sector has demonstrated the biggest increase in – this sector has seen a 459% increase in debt since 2008-09. BP and Shell accounted for £ 1 of every £7 borrowed. When oil prices collapsed in 2105, both these firms restructured and took on more debt – again to pay shareholder and director dividends.

The Consumer Goods sector borrows more than any other industry in the UK; representing ¼ of all UK net debt. ¾ of that debt was attributed to two firms – British American Tobacco and Imperial Brand.

Chief Executive of Link Asset Services, Justin Cooper commented that investors ‘should not be worried, despite UK business the alarming figures and that investors should focus on the benefits to the economy.   

“There was cause for concern two years ago as gearing levels – the ratio of a company’s debt to its equity capital – approached those seen just before the credit crunch. At the time companies’ profits were relatively low. Now, healthy global growth means higher profits. That has both brought gearing levels down, and means that interest costs and dividends are much more comfortably covered by profits. What’s more, companies are less dependent on short-term borrowings than at any time in the last 10 years”.