Funding Squeeze Stalls UK Business Growth

Three separate studies have highlighted a major funding concern for UK businesses. The recent research has shown that a lack of feasible financing options has hit large swathes of British-based companies.

After the Prime Minister called an early general election, business finance firm, Together conducted a survey amongst SME owners to determine what issues they think a new government should prioritise. Predictably, rising energy and general costs were a concern for almost half of all respondents (49%). A third, however, (33%) lamented the current difficulty of funding for small and medium-sized businesses.

Earlier in the year, UK Finance found that 2023 saw the amount lent to SMEs dropping for the third year in a row. Rather than being down to a lack of demand, however, this decline is instead attributed to the inaccessibility of business finance. The report blamed “demand uncertainty, higher interest rates, and the impact of lending taken out during the pandemic” for this slump.

‘The Greatest Leap’ study, meanwhile, sought to discover what has been holding medium-sized businesses back from taking the leap to grow into larger companies. A significant number explained that raising sufficient capital through funding had proven too difficult.  In fact, 39% had found securing funding from investors difficult, while 40% failed to secure finance from banks and lenders.

Of these, businesses in certain sectors are finding it harder than others to fund growth. Industries that have publicly struggled with insolvencies recently such as the construction and property sectors have faced particular issues. A respective 44% and 45% of directors in these industries reported funding difficulties.

Risk of stagnation

Senior Growth Consultant at Forbes Burton, Chris Leadley, said, “It’s an unfortunate byproduct of the UK’s current economic state, that even those that are doing well are being held back from expanding their operations. We’ve seen the national insolvency rates for businesses stay consistently high over the last few years, and that’s no doubt spooked investors and lenders alike. Add to that the fact that these institutions will have also seen profits hit by rising operational costs, and you can soon see why they’ve been so reluctant to loosen the purse strings.

“Whoever occupies Number 10 after the general election will need to look into a solution around this issue soon, or the country risks seeing its businesses stagnate with no scope for growth on the horizon. While staying still might not sound too hazardous for a business, if its competitors are growing, this inertia can actually see it lose ground on its rivals. Those competing against overseas companies may notice this more acutely, with manufacturing firms already trying to keep up with businesses in China and other countries.”

Is a lack of funding holding your business back?

We’ve helped countless companies to achieve their growth potential in a variety of different ways. Get in touch with one of our helpful advisers to discover alternatives to the methods that seem closed off to your business.

If it’s funding that your company needs, we can find you loans and other options from independent lenders that fit your needs perfectly. We also offer invoice factoring services that make otherwise inaccessible money readily available.

We enjoy great relationships with multiple lenders that enable us to provide manageable and competitive rates. Call us on 0800 975 0380 or email [email protected] for a free consultation to find out more.