UK smaller businesses sought out more debt last year, with many using it to fund investments that they had previously delayed.
The British Business Bank’s fourth Nations and Regions Tracker reported that 46 per cent of smaller firms accessed external finance last year, a 10 per cent increase from 2022.
The state development bank’s research suggested that this rebound followed subdued conditions in previous years.
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Between 2021 and 2023, fewer than half (44 per cent) of smaller firms surveyed had identified and made any investments in their business, the report said.
The research also found that small businesses are increasingly relying on credit cards. Across all the various finance types available, nearly one in five (17 per cent) businesses made use of credit cards followed by bank overdrafts (13 per cent) and leasing and vehicle finance (12 per cent), which the British Business Bank said highlights the challenges for smaller firms seeking external finance.
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Additionally, the report revealed a cautious outlook among smaller businesses. 61 per cent of respondents said they felt current trading conditions present more threats than opportunities, while 76 per cent said they were still feeling the impact of inflationary cost pressures.
However, the British Business Bank said that early signs from 2024 suggest a more promising outlook.
It reported a 21 per cent increase in the volume of approved loans and overdrafts in the first half of 2024 compared to the first half of 2023, with the South East experiencing the largest uptick.
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“While we continue to face a challenging economic environment, it is encouraging to see a renewed appetite for external finance among the business community,” said Louis Taylor (pictured), chief executive of the British Business Bank.
“This year’s Nations and Regions Tracker captures a mood of cautious optimism throughout the UK, and one which will hopefully see an uplift this year and beyond.”