Insolvency fears for UK firms recede despite four-year high in May, new research shows
Fears of insolvency are receding among UK firms despite recent data showing liquidations hit a four-year high in May.
According to new research from Evelyn Partners, 32 per cent of UK businesses believe there is a risk they will become insolvent in the next 12 months, down significantly on the 47 per cent of firms that thought there was a risk of default back in September.
Although this was still a high proportion, it was down significantly on the 47 per cent of firms that thought there was a risk of default back in September.
The rosier outlook comes even as insolvencies reached a four-year high just weeks ago.
Official figures showed that there had been a 40 per cent surge in insolvencies year on year with over 2,500 firms declared insolvent in May. 99 per cent of these firms had revenue of less than £1m.
In contrast, the 500 business owners surveyed by Evelyn Partners had revenue of over £5m, pointing to a stronger outlook for medium-sized businesses.
Claire Burden, partner at Evelyn Partners, said “the size of the business is a factor” in explaining the difference. “A lot of the liquidations at the moment are very small and many haven’t been trading for a while,” she explained.
Reflecting the increased confidence, the number of firms expecting to make redundancies dropped from 52 per cent in September to 36 per cent.
“Emerging out of these challenging months, it is encouraging that business confidence remains stable, and survival prospects have improved as we head into the summer,” she said.
However, there were concerns over access to funding, particularly as interest rates continue to rise. 29 per cent of firms said they faced difficulties raising funding.
Burden said that while funding from traditional banks is available, there were fairly “high hurdles” to accessing funds, particularly for loss-making companies.
“Owners are going to alternative sources of funding for working capital funding for example,” she said.
Traditional bank lending will make up just 12 per cent of total capital UK businesses are hoping to raise in the next six months, the research showed.
Nine per cent of funding will be raised from credit funds in the next six months while businesses are also increasingly turning to their own assets to raise funds. Leasing back physical assets will raise 10 per cent while the sale of assets will raise eight per cent in the next six months.