UK businesses are increasingly seeking additional finance and taking on higher debts to combat soaring inflation, rising energy bills and growing operational costs, a study has found.
The sharp rise in UK costs is the largest problem for around half of medium-sized businesses in the country, according to new data from accountancy firm BDO.
The survey of 500 business leaders found that almost a third of British businesses have been forced to seek additional finance due to soaring costs. Just under a quarter, 24%, are taking on higher debt to deal with the situation.
“This is a deeply concerning time for the UK businesses, with inflation and global uncertainty all threatening to stifle the post-pandemic recovery,” said BDO partner, Ed Dwan.
“The large number of businesses taking on new or increased debt piles in a period of mounting inflation is testament to the challenges they face, and the hike in National Insurance this month could prove a tipping point for many in the midst of the cost-of-living crisis.”
It comes as UK inflation has risen to 7%, the highest rate in 30 years. Businesses also face the prospect of this worsening, with the Office for Budget Responsibility warning that inflation could reach close to 9% this year.
BDO’s research found that most UK businesses had not planned for such levels of inflation and that they will be forced to pass on costs to consumers, who are also facing a rise in the cost of living.
Economists have warned that Britain is at risk of falling into a recession this summer due to slowing post-lockdown growth and the fallout from Russia’s invasion of Ukraine.
If the energy price cap goes up again in October, the Bank of England has warned that inflation could hit double digits.
Despite the clear problems for businesses brought on by soaring costs, some in the tech sector also see an opportunity.
Pilgrim Beart, CEO of DevicePilot, a software company for monitoring connected devices, told UKTN that despite the “scale of the human harm done by rising household energy costs,” the upcoming period “represents the best chance the UK has ever had to switch away from fossil fuels forever”.
Beart said: “It will be a grave situation in the short term, but also the catalyst for more people to invest in smart energy products like heat pumps and electric vehicles.”
According to Beart, it’s up to the tech sector to deal with the energy situation: “Utilities are renowned for being slow and cumbersome, but thankfully it’s the tech innovators in the renewables and smart energy sectors who will be responsible for the transition away from coal and gas.”