[New post] Debt and investment: what can we learn from SMEs’ investment behaviour during and after the Global Financial Crisis?

Debt and investment: what can we learn from SMEs’ investment behaviour during and after the Global Financial Crisis?

BankUnderground

May 25

Mai Daher and Christiane Kneer

Many UK firms weathered the Covid shock by taking on debt. Small and medium-sized enterprises (SMEs) in particular borrowed at an unprecedented rate and their debt increased by around a quarter since end-2019. But debt that allowed SMEs to survive the pandemic could now hamper the recovery as indebted firms may struggle to invest and grow. Debt on SMEs’ balance sheets could also make firms more vulnerable to future shocks and could amplify downturns if indebted firms reduce investment more following shocks. To understand how investment might evolve, our recent FS paper examines how leverage affected SME investment during and after the Global Financial Crisis (GFC) and discusses potential differences given regulatory and other changes since the GFC.

Key phrases

global financial crisis recent FS paper Many UK firms

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