UK public company debt jumped nearly seven per cent to hit £638bn, research published today shows.

Borrowing rose for the eighth consecutive year in 2018-19, according to analysis from Link Group.

Net debt (total borrowings less cash) rose 5.8 per cent to a new record of £443.2bn.

Net debt has risen by three quarters since the low point reached in 2010-11 in the aftermath of the financial crisis.

The £24.3bn increase in 2018-19 comes at a time when public company profitability is under pressure.

Operating profits were flat year-on-year having grown strongly over the previous two years.

Total debts rose 6.7 per cent to a record £638.3bn.

Borrowings at the top 100 companies grew faster than mid-and small-caps, though the increase in debt was mitigated by rising cash balances, which increase by one eighth.

Outside the top 100, total debts stayed flat.

However, operating profits fell year-on-year, as a result cash fell 6.8 per cent, increasing net debt for the group.

The value of debt compared to operating profit rose to 2.6x, the third-highest reading since 2008-9.

This remains below 4x, where companies may struggle to repay debt if they were called on to do so.

Michael Kempe, Chief Operating Officer of Link Market Services commented: “The increase in borrowing in 2018/19 isn’t a cause for concern. It’s well backed by assets, and easily serviced at present by the profits companies are making. There are of course companies and sectors under strain, but the overall picture is reasonably comfortable.

“Over the next year we expect companies to maintain a cautious stance as long as uncertainties abound in the UK, and while the risks to the global economy rise. The trajectory of interest rates should provide some comfort, however, as central banks have sounded increasingly dovish of late.”

