Debt is rising. Can lower rates rescue the UK’s most overstretched industries?

Interest rates in Britain have now fallen five times in just over a year, as the Bank of England reacts to slowing wage growth and a sluggish economy. For consumers and homeowners, the shift brings cautious optimism. For business, its a chance for companies, particularly those in highly leveraged sectors, to refinance and rebalance. Plimsoll’s financial models suggest that in these sectors, lower debt servicing costs are required to get businesses investing and driving the economy forward.

Plimsoll’s predictive financial analysis tracks which sectors are most exposed to rising debt. According to the latest data, three key industries stand out: pharmaceutical manufacturers and distributors, oil and gas, and building product manufacturers and suppliers. In each, around a third of companies are carrying dangerous levels of debt. Many are already loss-making. Cheaper borrowing costs may offer some breathing space, but only for those able to use it wisely.

Pharmaceutical manufacturers and distributors

38% of companies are carrying critically high levels of debt

While demand across the pharmaceutical sector remains robust, profitability is another matter. Plimsoll data shows a large proportion of firms in this market are underperforming, nearly a quarter are classified as being in financial danger. High input costs, supply chain complexity, and slow payment cycles have put further pressure on cashflow.

For companies in distress, lower interest rates may offer an opportunity to refinance existing liabilities. But it is the more financially stable players that are best placed to act, particularly through acquisition of distressed peers. With almost four in ten companies highly indebted, consolidation could be a defining trend in the next cycle.

Oil and gas

32% of companies are in high debt. 1 in 3 are in financial danger

Few sectors are as exposed to capital markets as oil and gas. With many operators relying on credit to fund exploration, drilling, and infrastructure, a long period of high interest rates has taken its toll. While Plimsoll data shows strong performance at the top of the market, the tail is struggling - over a third of companies are now rated in financial danger.

Lower borrowing costs could help firms restructure or delay further cost cuts, but they may also spark a new wave of competition. Price wars and margin erosion have previously been driven by heavily indebted firms fighting for survival. Without strategic realignment, cheaper debt alone will not restore balance.

Building product manufacturers and suppliers

31% of companies in high debt. Almost a quarter are loss-making

This sector is highly sensitive to interest rates. Linked closely to housebuilding and commercial construction, building product firms tend to ride the economic cycle more sharply than most. Plimsoll’s latest report shows that growth across the market has been negative, and one in four companies are now serial loss-makers.

For this group, rate cuts are essential. Debt repayments have eaten into already slim margins, and any reduction in borrowing costs may provide immediate relief. However, with over a third of firms struggling to grow, and many carrying unsustainable debt, only those with tight cost control and operational discipline will benefit from the new cycle.

What next?

While lower rates offer short-term optimism, Plimsoll’s data suggests it will not be a panacea. High debt levels are a persistent structural issue in several UK industries, and interest rate cuts do not alter underlying business fundamentals.

The companies that thrive in this new phase will be those that combine financial resilience with strategic intent. Plimsoll’s predictive analysis helps identify which companies are at risk, and which are ready to expand… with over 30 years of continuous financial tracking, our reports reveal where the real opportunities and vulnerabilities lie.