As the UK faces continued economic turmoil and volatility, business owners’ confidence is taking a hit, with 22% of business owners lacking confidence that their business could survive a recession in the next 12 months.

As rate rises loom large in the minds of business owners, additional base rate rises, could be set to curb this confidence even further.

Research of 501 UK business owners with revenues of £5m upwards from wealth management and professional services group, Evelyn Partners, finds business owners have already taken, or are considering taking significant steps to protect their businesses in the current climate, refinancing their debt or postponing significant plans such as acquisitions and international expansion.

Debt burden places significant strain on businesses with fears of further rate rises

As concerns around the health of the UK economy mount, businesses are taking precautions to shore up their financial position, however concerns still persist when it comes to their financial stability.

Almost one in two (47%) UK business owners recognise there is a likelihood they could face bankruptcy or insolvency in the coming months, with 15% citing this as highly likely. A further 52% think there is a likelihood they could default on their debt, with 15% believing this to be a highly likely prospect.

Businesses are taking proactive measures to mitigate their debt burden in a climate of rising interest rates, almost a quarter (23%) of business owners have already refinanced their debt while a further 43% of businesses are considering doing so. Additionally, almost one in ten (8%) businesses have ruled out taking on any additional debt in a bid to minimise their debt burden as borrowing costs grow.

Claire Burden, Partner, Advisory Consulting at Evelyn Partners comments: “The consensus is that the Bank of England has much further to go when it comes to rate rises. It’s encouraging to see a quarter of UK businesses have taken decisive measures to refinance their debt before rates rise further, those that are considering refinancing are urged to do so sooner rather than later.

“While many macro factors such as inflation, supply chain disruption or the cost of materials may be out of business owners’ hands, refinancing is a crucial card which businesses shouldn’t hesitate to play so they can strengthen their financial position during this challenging period for the UK economy.”

“The most proactive business owners take advice early, whilst there are more options available. A qualified turnaround adviser will work to unlock cash from the business’ own balance sheet, cut costs and take whatever decisive action is necessary to save the business.”

Acquisition activity is halted as businesses instead chose to divest

With many macro factors beyond businesses’ control, business owners are taking proactive measures when it comes to their own operations to help improve their finances. Unfortunately, for many business owners, this has come at the cost of key long-term business goals.

M&A activity has been hit hard amongst businesses with revenues of £5m upwards. One in five business owners have already postponed or pulled out of M&A activity, while a further one in two are considering doing so. On average, acquisitions have been postponed by over two and a half years (2.66 years).

While acquisitions have been put on pause, disposals are pressing ahead with businesses divesting to streamline operations to reduce overheads and unlock capital. One in four business owners have sold off part of their business in response to the current climate, while a further 43% are considering this.

Meanwhile, those looking to sell their business altogether have postponed this play by two and a half years (2.61), no doubt waiting for more favourable market conditions, and valuations to return to higher levels.

UK businesses curb their geographic footprint

Expansion plans are also being impacted, as firms chose to pare back their international footprint or postpone future expansion plans.

Almost half of business owners believe they may need to withdraw from a key market in response to the current macro challenges.

Businesses who were looking to expand outside of Europe have delayed this goal by more than two years (2.62), while those looking to expand into the continent have delayed their plans by almost three years (2.83), as businesses instead choose to contend with near-term challenges and focus on domestic markets.

Claire Burden, Partner, Advisory Consulting at Evelyn Partners adds: “In periods like these, good advice, from advisers who understand your business and your businesses’ ambitions is critical. Business leaders are undoubtedly having to make tough decisions, postponing long-term goals to put their firm in the best financial condition to contend with current challenges. However, the best adviser should equip you with advice that can enable you to navigate the immediate obstacles, while also empowering and enabling you to remain focused on your long-term goals.”