As uncertainty continues to linger over the UK economy, fears of business insolvency have dropped significantly, as per new research conducted by Evelyn Partners.
Around 32% of UK businesses believe there is a risk of becoming insolvent in the next year, a significant decrease from 47% in September 2022.
Despite an unprecedented increase in corporate insolvencies to a four-year high, the research, conducted on 500 businesses with revenues over £5m, shows that business confidence has remained mostly stable, with 77% expressing confidence in their ability to weather a potential recession.
However, the UK business landscape is not without challenges. Less than a fifth of UK businesses report being negatively impacted by the diminished appetite of lenders following the US regional banking crisis and the subsequent collapse of Silicon Valley Bank. Consequently, nearly 30% of businesses have encountered difficulties in sourcing funding in the past six months.
As conventional bank funding becomes scarce, UK businesses are exploring alternative means of financing.
The study revealed that in the next six months, only 12% of the total capital that UK businesses aim to raise will be sourced from traditional banks.
Alternatives like credit funds are expected to provide 9% of the funding, while leasing back physical assets and selling operational assets are set to raise 10% and 8% of the total capital, respectively.
Claire Burden, partner at Evelyn Partners, said: “Businesses have weathered an exceptionally challenging winter, in which the cost of funding has soared, consumer confidence has taken a sizeable hit and energy prices have rocketed. Emerging out of these challenging months, it is encouraging that business confidence remains stable, and survival prospects have improved as businesses look ahead over the next year.
“Businesses are not out of the woods just yet, however. Although funding remains in ample supply, banking instability and interest rate rises has led to a buyers’ market.
“For borrowers and management teams this has resulted in more cumbersome financing processes. Businesses looking to re-finance or take on additional funding should therefore start the process early and enlist the support of specialist advisors to help identify funding options and the providers best aligned to their business needs.”
