Two in five SMEs fear insolvency due to recession
Two in five established businesses are concerned that they could face insolvency or mass redundancies as the UK enters into a recession.
According to a new survey from Allica Bank, 41 per cent of established businesses fear insolvency due to the pending recession, while 39 per cent said that they are worried that their business will be critically impacted.
43 per cent said that they will need to borrow money to stay afloat within the next 12 months, and 37 per cent plan to refinance existing debt.
“It’s clear that large numbers of established small- and medium-sized enterprises (SMEs) are struggling to stay afloat and in fact, many are going to find themselves in further debt just to keep the lights on,” said Conrad Ford, chief product officer at Allica Bank.
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He added that banks and other lenders must do more to help these businesses.
Allica’s network of brokers have also warned of the risks that SMEs face as a UK recession looms.
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 has more than doubled.
“There has been a deluge of businesses seeking funding to cover the increasing costs of maintaining their businesses,” Field said.
“This covers everything from essential capital expenditure to maintaining the business premises, to covering wage bills and supporting interest payments for financial commitments.
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“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.”
The UK economy shrank by 0.2 per cent between July and September, with economists warning that the country faces the longest recession on record.
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