Risk of insolvencies to ease in coming year

The risk of insolvency for UK businesses could ease in the coming year, with fears over insolvency falling “considerably” amongst business owners despite ongoing economic uncertainty, according to new research from Evelyn Partners.

According to the firm, only one in three (32%) UK businesses surveyed acknowledged there is a risk that they will become insolvent in the next 12 months, down “considerably” from September 2022, when 47% of firms said they believed there was a risk of insolvency. 

While corporate insolvencies are at a four-year-high, according to the latest government data, Evelyn Partners said that with prospects of insolvencies easing, these figures could be reaching their peak.

The research of 500 business owners with revenues of £5m upwards indicates that business confidence has remained largely stable over the past nine months, with 77% of businesses confident they will survive an upcoming recession, in line with the 78% that reported the same confidence last September. 

Evelyn Partners said this stable outlook comes despite the challenges that have arisen in the intervening period, including sticky inflation, ongoing rate rises, toughening lending criteria and higher taxes.

According to the firm, businesses now seem to “be in a stronger position to weather this uncertainty and have rowed back from plans to batten down the hatches”. 

It also found that with traditional lender appetite suppressed, UK business owners are looking to alternative means of funding to finance their businesses. Of the total capital UK businesses are looking to raise in the next six months, just 12% of this funding will be from traditional banks. More are turning to alternative means of funding, such as credit funds, where 9% of funding is set to be raised in the next six months.

Claire Burden, partner at Evelyn Partners, said: “Businesses have weathered an exceptionally challenging winter, in which the cost of funding has soared, consumer confidence has taken a sizeable hit and energy prices have rocketed. Emerging out of these challenging months, it is encouraging that business confidence remains stable, and survival prospects have improved as businesses look ahead over the next year.

“Businesses are not out of the woods just yet, however. Although funding remains in ample supply, banking instability and interest rate rises has led to a buyers’ market. For borrowers and management teams this has resulted in more cumbersome financing processes. Businesses looking to re-finance or take on additional funding should therefore start the process early and enlist the support of specialist advisors to help identify funding options and the providers best aligned to their business needs.”