Our new UK plc Debt Monitor provides a unique and comprehensive view of the scale and shape of corporate borrowing since the financial crisis. We measure the level of debt taken on by the UK’s listed companies, the trends over the last 10 years, and how borrowing differs across companies and sectors.
Nigel Fish, Finance Director at Link Market Services, discusses the results with Jeremy Naylor of IG
After years of rock-bottom interest rates, the debts of the UK’s listed companies have risen to a new record. By the end of the 2017/18 financial year net debt had soared to £390.7bn1 (total debts less cash). Since its low point in 2010/11, in the vice of the credit crunch, net debt has jumped by 69%.
The oil sector has seen the fastest growth in net debt, up 459% since 2008/9. In 2017/18, BP and Royal Dutch Shell accounted for an astonishing £1 in every £7 of all UK plc’s net debts. Faced with a collapse in the oil price in 2015, both undertook major restructuring exercises, and took on additional debt to fund their activities and help maintain their dividend payouts while profits were at rock bottom.
The debt/equity ratio provides a useful measure of how highly geared a company is, or in other words, how large its debt burden is.
“The economic recovery since the credit crunch has been slow, but very long, and some commentators suggest the cycle may be drawing to a close. Total borrowing may continue to rise as it’s a vital part of the investment financing-mix, but gearing, or the burden of debt is on the wane. Investors may prefer to see UK plc focus on reducing gearing further to provide itself more breathing space in the next global downturn.” Justin Cooper, CEO, Link Market Services
All data was sourced from Factset and the Link Asset Services Dividend Monitor.
Link Asset Services gathered ten years’ selected balance sheet data from Factset on all the companies currently listed on the main market in London. It excluded any company without a ten-year history of data, and all companies in financial sectors (banks, insurers, asset managers etc), except property. In all, 440 companies are included in the study. Together they account for over 96% of the total assets and the total liabilities of UK listed companies.
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