Prem Sikka: How companies use debt to line their pockets

Corporate debt and greed are going to sink the British economy, writes Prof Prem Sikka.

Tax relief for the corporations but none for us because it distorts the market, says the government.

Corporate addition to high debt threatens to destabilise the world economy. Not my words – those of the International Monetary Fund.

A recent report by the IMF says that “in a material economic slowdown scenario, half as severe as the global financial crisis, corporate debt-at-risk could rise to $19 trillion —or nearly 40 percent of total corporate debt in major economies—above [2008] crisis levels.”

In other words, in an economic slowdown, many firms will be unable to cover even their interest expenses with their earnings. Countries most at risk are US, China, Japan, Germany, Britain, France, Italy and Spain.

One study estimated that in 2018 UK s FTSE 100 companies alone had debt of £406bn.

Leftfoot Foreward

Prem Sikka: How companies use debt to line their pockets