Wednesday, May 29, 2024

Access to capital is top challenge for mid-sized businesses

Trying to source new capital, such as bank loans, grants and private equity, is the most significant challenge for over a quarter of the UK’s mid-sized businesses, according to the latest research from accounting and advisory firm, BDO.

BDO’s bi-monthly survey of 500 mid-sized businesses, which looks at the challenges and opportunities facing UK companies with a turnover between £10m-£300m, reveals nearly one in three (32%) have ambitions to access new finance, such as additional bank loans, government grants, private equity or venture capital, or via a listing on UK public markets in the next six months.

However, difficulties accessing finance are proving problematic and restricting growth ambitions. More than a quarter (27%) say it is one of their biggest challenges over the next six months, with a similar number (26%) now struggling to deliver on their growth plans, such as entering new markets or offering new products or services.

Manufacturers are struggling the most with challenges around accessing new capital (32%), with real estate and construction businesses following closely behind (31%).

These findings come as high borrowing costs, driven by elevated interest rates, make it more challenging for mid-sized businesses to access and service debt finance. In addition, while official data suggests inflation may be easing, higher costs across the board remain a constant battle for businesses looking to grow.

Businesses reported that high costs in the supply chain are a persistent problem. One in five (20%) are suffering from increased costs as a result of changes to trade policy and regulation, such as different tariffs or customs rules, while a similar number (18%) say costs such as fuel are too high.

Business outlook improves after technical recession

Despite difficult trading conditions, mid-sized businesses remain cautiously optimistic. Over half (53%) feel more confident about the outlook for their business for the rest of the year compared with the second half of 2023, when the UK recorded a technical recession.

Many businesses surveyed were buoyed by the prospect of lower borrowing costs, as 27% expect a positive impact from future interest rate cuts. This outstrips concern from businesses who feel less confident, with one in five (20%) saying a cut may come too late to help improve their growth prospects.

Business leaders are calling for the next government to help drive their growth in the long term. Over a third (36%) want to see the Government prioritise improving access to capital, for example by enabling smaller business banks to enter the market or through government grants.

Almost a fifth (19%) want to see less complex regulation around listing on the London Stock Exchange, with a similar number (18%) hoping to see more progress on levelling up the regions outside London and the South East.

Richard Austin, partner at BDO, said: “Access to finance is a huge contributing factor to UK economic growth. Businesses have the appetite to drive forward long-term growth plans, but the difficulties experienced in accessing the capital needed to fund that growth are proving unsurmountable for many.

“Despite remaining resilient and realistic, these businesses need more support to achieve their ambitions. The mid-market is the engine of the UK economy, providing one in four jobs and over £1 trillion in revenues.

“The issues they are highlighting should not be overlooked by policymakers as their growth will play a key role in the overall economic recovery of the UK.”

A message from the Editor:

Thank you for reading this story on our news site - please take a moment to read this important message:

As you know, our aim is to bring you, the reader, an editorially led news site and magazine but journalism costs money and we rely on advertising, print and digital revenues to help to support them.

With the Covid-19 pandemic having a major impact on our industry as a whole, the advertising revenues we normally receive, which helps us cover the cost of our journalists and this website, have been drastically affected.

As such we need your help. If you can support our news sites/magazines with either a small donation of even £1, or a subscription to our magazine, which costs just £33.60 per year, (inc p&P and mailed direct to your door) your generosity will help us weather the storm and continue in our quest to deliver quality journalism.

As a subscriber, you will have unlimited access to our web site and magazine. You'll also be offered VIP invitations to our events, preferential rates to all our awards and get access to exclusive newsletters and content.

Just click here to subscribe and in the meantime may I wish you the very best.

Latest news

Related news

By continuing to use the site, you agree to the use of cookies. more information

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.