Two in five businesses fear insolvency or mass redundancies as UK heads for recession

More than two out of every five (41%) established SMEs (those with between 10 and 100 employees) across the UK expect to shut their doors permanently, be forced to conduct mass redundancies or close locations within the next 12 months, according to a new survey by Allica Bank.

And more than one in three (39%) fear their business will be fatally or critically impacted by any forthcoming recession, while a similar number (43%) say they will have to borrow money just to keep their business afloat or refinance existing debt (37%).

The research also reveals that 83% of business owners want to see their bank do more to support them as costs of raw materials, fuel, interest rates and inflation continue to rise.

The Government’s new energy freeze policy will go some way to offering support for businesses, with over half saying it will be critical to keeping their doors open. Almost three quarters (73%) of businesses surveyed, however, don’t believe the support will last long enough, potentially leading to more insolvencies.

Conrad Ford, chief product officer at Allica Bank, said: “It’s clear that large numbers of established small and medium businesses are struggling to stay afloat and in fact, many are going to find themselves in further debt just to keep the lights on.

“Banks must do more to help these businesses – either with funding or sharing expertise – because government help can only go so far. As an industry, we support businesses who, in turn, employ millions of people already struggling in a cost-of-living crisis. Our team of relationship managers have been working closely with our business customers to provide information and support, and we think that’s going to become ever more important in the coming months.”

The picture painted by the data is also supported by Allica’s network of brokers. Chris Field, head of care and hospitality at Sirius Property Finance, said the number of business owners applying for funding to help them survive in the current climate, and to some extent ‘futureproof’ their business, has more than doubled.

Chris said: “There has been a deluge of businesses seeking funding to cover the increasing costs of maintaining their businesses. This covers everything from essential capital expenditure to maintaining the business premises, to covering wage bills and supporting interest payments for financial commitments.

“We have seen an increase in enquiries where applicants are looking to refinance their business, and this is usually due to their current facility approaching its renewal date (and the new terms on offer being untenable). So they are looking for us to run a process to identify preferable terms, or they are looking to refinance to release equity and reinvest in the business, expand, or carry out improvement work. A good example of this is in the hotel and hospitality sector, where the quality of the asset can often dictate KPIs, which ultimately impact revenue and net cashflow.

“If we don't all sort this out, the Government’s levelling up agenda and its attempts to bounce back from the current crisis are at risk of being just ‘soundbites’ rather than something resembling reality! These businesses are vital to local communities given the activity they generate, who they serve and who they employ.”