Access to capital is top challenge for mid-sized businesses
Access to capital is top challenge for mid-sized businesses
- Accessing capital the top challenge for over a quarter (27%) of mid-sized businesses in the next six months
- Businesses calling for support from the next government to help drive long-term growth, with 36% wanting better access to capital
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 easing¹, 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.”
[1] ONS, Consumer Price Index, April 2024
ENDS
Note to editors
Accountancy and business advisory firm BDO LLP provides integrated advice and solutions to help businesses navigate a changing world.The organisations we work with are Britain’s economic engine –entrepreneurially-spirited, high-growth businesses that fuel the economy.
We understand the ambitions and entrepreneurial mindset of those we work with and have the global reach, integrity and expertise to help people and businesses succeed.
BDO LLP
BDO LLP operates in 17 offices across the UK, employing 7,500 people offering tax, audit and assurance, and a range of advisory services. BDO LLP is the UK member firm of the BDO international network.
BDO’s global network
The BDO global network provides business advisory services in 166 countries and territories, with more than 115,000 people working out of 1,776 offices worldwide. It has revenues of US$14bn.