Barriers to accessing capital ‘stalling UK business growth’

Against a backdrop of lending to SMEs dropping for a third straight year, medium-sized businesses are facing difficulty securing the capital they need to make the ‘leap’ to large, according to a new report from advisory and accountancy firm Menzies.

The ‘Greatest Leap’ study has been conducted with 500 UK CEOs, MDs, COOs and founders of medium-size and large businesses to better understand what is stalling the leap from medium to large for UK businesses. 

Of those surveyed, 39% found challenges with securing interest from investors slowed their growth and 40% have struggled to borrow from banks and lenders. A key element of this, according to the report, involved raising the capital to fund growth plans.

This was especially apparent in the number that have found difficulty securing external investment from the likes of VCs, private equity firms or private investors.

While almost two in five (39%) businesses across the board said they struggled to get these types of investments to fund the jump from medium-size to large, this was even more pronounced in specific sectors.

Property, construction and manufacturing businesses struggled more than average to secure investment, with 45% and 44% of their leaders respectively saying investment to fund growth was hard to come by.

Simon Massey, managing partner at Menzies, said: “Preparing to make what we’ve coined ‘The Greatest Leap’ – that seismic jump between medium-size and large – often means grappling with the challenge of securing adequate external investment for many businesses.

“While it’s true that there has been some slowdown in this area, this perhaps doesn’t paint the full picture. 

“It’s imperative that businesses explore all possible avenues for attracting external investors. Many are overlooking potential routes, often due to misconceptions or unfamiliarity with the options available to them.

“Private equity stands out in particular as one of these overlooked opportunities – there is some hesitancy out there among businesses due to a fear of losing control, but it has huge potential to accelerate growth and impart strategic expertise, in the appropriate circumstances.”

For those who wanted to pursue the route of borrowing from banks or other lenders instead, the picture is similarly difficult.  

Two in five (40%) leaders claim limited access to lending or being denied loans has been a barrier to growth. Even if they were to be approved, however, 40% still say they were put off by the current high cost of borrowing.

The industry that found more difficulty in this area than any other was legal services, where almost two in three (62%) found limited access to lending and 77% said high interest rates have stalled their growth.

Simon added: “Even in times of economic slowdown, there will always be appetite to lend to or invest in a business with a robust business plan, clear growth trajectory and the right management team in place.

“If businesses are to attract and secure the lending or investment they need to bring their expansion plans to life, they must ensure that all of this is in order and they are putting themselves in the best possible position.”

With the leap from medium-size to large proving a difficult one, Menzies has created ‘Are you ready for The Greatest Leap: How to accelerate your business ambitions’, a guide for business leaders looking to grow from a medium-size business into an established larger enterprise.

The guide provides research, expert insight and strategic advice from Menzies’ team of specialists to help empower leaders to navigate the next stage of their growth journey with confidence.

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