Rising interest rates could tip struggling channel companies over the edge

Latest Plimsoll research suggests 334 out of 1000 UK channel firms are more in debt than they were four years ago

Struggling channel companies are more in debt than ever before, according to the latest research from analyst house Plimsoll Publishing.

The analyst looked at the top 1,000 computer maintenance and repair companies (none of which have been named) in the UK and revealed that 334 of those firms are in more debt now than they have been in the last four years.

Drilling down even further, 153 companies are already seeing those debts impact their business and their competitiveness, Plimsoll claimed.

Of that number, 35 companies have swapped short-term debt for long-term debt, 10 have seen interest payments erode profitability as any extra cash is swallowed up in in repayments, and 33 have pushed for extra growth, which results in more demand for working capital and increases debts further.

David Pattison, head of research at Plimsoll said: "We are always surprised how no-one at these companies seems to realise their debts are rising and the effect it's having on the overall financial strength of the company.

"Unfortunately it's not something they tend to measure until it's too late."

Pattison added that if debts are allowed to go unchecked, any disturbance to the business, such as the loss of a key client, an increase in interest rates or a large bad debt could end in disaster and be the "straw that breaks the camel's back".