Nine in ten mid-sized businesses halting growth plans due to difficulty accessing capital

  • Difficulty accessing capital is forcing businesses to scale back expansion plans
  • More than half (56%) say record levels of inflation or increased overheads across energy bills, rent and payroll, are the biggest challenges they face over next six months
  • Businesses are considering private equity and new sources of financing as they call on Government to help improve access to cash

Difficulty accessing capital is forcing nine in 10 (91%) of mid-sized businesses to curb growth plans, according to the latest research from accounting and advisory firm BDO.  

The bi-monthly survey of 500 leaders of medium-sized businesses, which looks at the challenges and opportunities facing UK companies, reveals nearly one in four (24%) are being forced to scale back the business or make redundancies as a result of difficulty accessing capital. 22% are unable to finance plans for expansion, with a further fifth (20%) struggling to invest in new technology or software to improve their business for this reason.

An additional fifth say they are unable to raise salaries while almost a quarter (24%) are also struggling to invest in initiatives or benefits to retain current employees. Concerningly, this comes as 24% of businesses cite staff and skills shortages as one of their biggest challenges over the next six months.

Amid growing concerns about their access to capital, record levels of inflation or increased operating costs, such as energy bills, commercial rent and payroll, are the biggest challenges facing over half (56%) of mid-sized businesses. Improving cash flow, generating new sources of revenue or raising new financing from existing funding sources are also the top priorities for more than two-fifths (44%) of companies over the next six months.

Against this backdrop, businesses are turning to private capital markets for potential funding solutions. Private equity investment is the most attractive source of capital for almost a third (32%) of those in need of new funding, followed by equity capital markets (28%) and government support schemes (25%).

As a result of tough economic challenges, 40% will need to raise funds over the next year, while a further third (33%) plan to source new financing in the next 13 to 18 months.

Mid-sized companies, which employ eight million people and provided a around a quarter of UK jobs according to further research,¹ are now calling on the Government to support them with rising costs and improve access to capital to make the UK a more appealing place to do business.

More support from policymakers to address high costs from inflation was the most common call among business leaders. Almost 30% want the Government to do more to improve access to private sources of funding, including bank loans, regional banking and private equity investment.

Even more (32%) are calling for better public financing, such as government grants, specifically targeted at businesses in the mid-market. More than one in three (35%) want the Government to introduce or improve tax incentives to help support their business and a third (33%) believe the Government could do more to offer support with energy bills, whether through subsidies or improving insulation for commercial buildings to cut demand altogether.

Richard Austin, Partner at BDO LLP, said:

“Despite staying resilient through an incredibly difficult time, tough challenges remain for mid-sized businesses, with access to capital becoming a critical issue.

“As the engine of the UK economy, these companies are responsible for a large, vital proportion of its income and employment and their success will play a key role in the economic performance of the UK overall. Businesses believe more can be done to address their concerns, drive their growth and ensure the UK remains an attractive place to do business both today and in the future.”

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 18 offices across the UK, employing 7000 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 164 countries, with 95,000 people working out of 1,713 offices worldwide. It has revenues of $11.8bn.  

Contacts    

Email: media@bdo.co.uk 

Ella Hatfield
Email: ehatfield@headlandconsultancy.com
Tel: +44 (0)77 9868 7042

Verriin Kaur
Email: vkaur@headlandconsultancy.com 
Tel: (+44) (0)7786 767582