More than 20 percent of small businesses pay an interest rate above 10 percent on their debts, according to the Fujitsu/JPMorgan Small and Medium Enterprise Report. Subsequently, an increase in costs, paired with slow consumer demand, could lead to higher unemployment.
JP Morgan spokesperson Brian Johnson says that logically, higher debt means less money to spend. “Less money to spend slows down activity, people have got to cut out their variable costs and your biggest variable costs are all of us people sitting around the table.”
The report stated that unemployment following higher interest rates would be a “lagged effect” as the current drop in business confidence would curb borrowing. It also observed that SME write-offs have “consistently escalated” since 2005 with expectations for write-offs to increase in the medium term given the challenging conditions.
