As reported by This Is Money, nearly a third of smaller UK firms have paused or axed parts of their businesses over the last two years in response to a lack of financing
The cost of borrowing has soared since the Bank of England began hiking interest rates in 2022 and many small businesses are unable to obtain financing without shouldering crippling terms. YouGov data analysed by Manx Financial Group suggests 30 per cent of UK small- and medium-sized companies (SMEs) have been forced to cut back.
Areas most likely to be paused of cut back include hiring, research and development, product launches, marketing, and market expansion efforts since 2023. In efforts to boost smaller firms, the government raised the limit at which businesses start paying employer national insurance from £5,000 to £10,500 in December.
This means 865,000 employers will pay nothing in national insurance contributions next year, according to the government. But Manx chief executive Douglas Grant said the government ‘must prioritise targeted measures to unlock credit, boost lender collaboration, and accelerate growth’.
The Bank of England is expected to hold base rate at its current level of 4.25 percent next week as concerns about resurgent inflation outweigh signs of economic deterioration. However, current market pricing suggests the rate could fall as low as 3.75 percent by year end with two more cuts of 25 basis points each. Other factors cited by firms struggling to borrow include inflexible repayment terms, lengthy processes and lenders’ poor understanding of SME needs.
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