Debts rise but may have peaked

The collective debts of UK plc have hit an all-time high of almost £391 billion, research out today shows.

The latest annual Link Asset Services UK plc debt monitor reveals that after years of rock-bottom interest rates, the debts of the UK’S listed companies have soared to a record £390.7bn – easily surpassing pre-financial crisis levels.

Since the low point in 2010/11, net debt has leapt by £159.6bn. Moreover, most of this increase – £122.6bn – has been in the last three years alone.

Over the same three-year period, UK companies have paid their shareholders £263bn in dividends, despite profitability being squeezed and dividend cover levels – the relationship between profits and dividends – falling to record lows in 2016/17, before recovering in the past year.

Justin Cooper, chief executive of Link Market Services, said: “It seems we may now have seen peak indebtedness. Two years ago, corporate borrowing soared higher, gearing levels approached those seen just before the credit crunch, and company profitability was still in the doldrums.

“Investors had good cause to be concerned, particularly as the interest rate cycle was primed to turn upwards again.

“Now, healthy global growth means higher profits. That has brought gearing levels down and interest costs and dividends are much more comfortably covered by profits.”