New research from Grant Thornton has found that 70% of UK businesses expect that they’ll need to apply for additional funding this year, with the most common amount expected to be needed was between £10m-£25m. The top reasons for this extra funding are to “invest in new premises or equipment” and to “invest in R&D or new service offerings”.
More than one-quarter of those who required funding also said that it would be needed to manage challenges in the market, including to “support liquidity requirements linked to challenging trading conditions” (29%) and to manage the impact of “increasing employment costs” (26%).
However, many businesses do not anticipate it will be easy to secure the extra funding their business requires. In fact, more than two-thirds (68%) said that their business is currently finding it hard to access new sources of funding. As a result, many (69%) are increasingly turning to alternative lending sources. In fact, the number of businesses who would consider funding from alternative funding sources (82%) such as asset-backed loans or specialist credit funds, or a debt fund, is the same as those who would consider a traditional bank loan (82%).
However, larger businesses are much more confident that their existing lender would support their additional funding needs (92%) compared with the medium-sized businesses surveyed (80%). They are also found to have more flexibility with the funding sources available to them, with 83% of larger businesses prepared to move to a new lender that may be more expensive but offered better terms, compared with 68% of medium-sized businesses.
George Fieldhouse, Grant Thornton’s head of debt advisory, said: “Access to funding is crucial for driving business growth and while businesses of all sizes are anticipating that they’ll need to access additional funding this year, many are not expecting it to be a straightforward process.
“High interest rates are an ongoing challenge in the wider market, along with rising input and labour costs – exacerbated by the increases to employer NI contributions and National Minimum Wage announced in the Budget – and, for some sectors, exposure to waning consumer confidence. These issues are likely increasing businesses’ need for further funding while also impacting their ability to access it.”
A lack of funding is also found to be constraining businesses’ abilities to boost their productivity levels. Of the 68% who noted this as an issue, the biggest barriers they are facing when accessing new funding sources are:
Almost three-quarters (73%) of the businesses surveyed believe that the government needs to do more to help improve access to private sources of funding for businesses. These businesses believe that the government should prioritise the actions below to address this issue:
It is vital that the government and regulators aim to deliver clarity, predictability and confidence for corporates so that they can be better positioned to contribute towards UK growth
The research comes as Chancellor of the Exchequer Rachel Reeves launched a new growth strategy, which included support for a third runway at Heathrow airport. Welcoming the chancellor’s announcement, ACT chief executive Annette Spencer said that for companies looking to “plan, invest and operate it is vital that the government and regulators aim to deliver clarity, predictability and confidence for corporates so that they can be better positioned to contribute towards UK growth”.
She added: “Investing and improving connectivity and digital infrastructure helps businesses large and small and should be welcomed. However, much of the detail of most relevance to corporate treasurers is pending publication of a series of reports over the coming months on Regulatory framework, Pensions and Industrial Strategy.”
However, Spencer warned that businesses were seeing mixed signals from the government. She said: “The government's expressed commitment to prioritise growth runs counter to many of its earlier decisions, notably the increase in employer NICs (and changes to NIC thresholds) which will likely hinder – or at least slow down – investment and growth in all sectors... The messaging and the actions need to work in tandem and consistently if investor confidence is not to be further eroded.”
The Grant Thornton research, carried out by Censuswide, surveyed senior decision makers in 800 UK businesses (600 medium-sized businesses with revenue from £50m-£1bn and 200 larger businesses with revenue £1bn+) in December 2024.
Philip Smith is the editor of The Treasurer
