Since 1694, interest rates have averaged at 6%, so why does everyone assume they should be lower?

Yesterday saw a Webinar which asked the question “What is the Status of Debt Finance in 2023”, at this highly sensitive moment. This is the latest in a line of webinars first launched in 2020 and hosted in partnership between HVS, Bird & Bird, AlixPartners and EP.

Each year so far this decade seems to lay out new challenges and 2023 is proving to be no different. It seems that both Policymakers and financial executives are striving to understand what the future shape of the financial sector will be as the period of “low for long” interest rates recede further in the rear-view mirror. This then naturally leads to trying to understand far better a whole number of factors. Debt finance has over the last fifteen years become mainstream in business investment but how will it potentially evolve now and how will factors such as ESG impact, if at all?

We also know that debt is both a government as well as commercial concern impacting business and society. Public sector net debt stood at 100.1 per cent of GDP in May 2023, topping 100 per cent of GDP for the first time in 62 years. Borrowing in the first two months of 2023-24 totalled £42.9 billion, almost double the same period last year and £2.1 billion above the monthly profile consistent with our March forecast. If it is such an issue on a macro scale, then of course it will impact on all businesses too. We know the world does have a major debt problem and Companies are being challenged and there are major concerns being raised.

In our most recent webinar in April, we polled more than 400 attendees on what they considered to be the main barriers to hotel investment – a lack of available debt finance drew the most support. It is said they there is no shortage in the availability of debt finance. Is this true and is it likely to remain so through the year? How do lenders view the market?

Many experts say that it has been an education process as the cost of borrowing increases, as many still want the same deals as in the past. Is this the case or is the market evolving?

Overall, there appears to be a cautious optimism so how does the picture look and what is the longer-term outlook?

To watch this Webinar, please visit: https://www.youtube.com/watch?v=5fJaMUxSOfA