Over 90% of mid-sized businesses struggling to access funds

27th June 2023

Difficulty accessing capital is forcing nine in ten (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.”