Turnover is vanity, profit is sanity, and cash is king the saying goes as credit apathy restricts potential growth opportunities affecting survival rate of British startups. An alert for a country which has led Europe’s tech startup scene for the past five years amidst hiccuping Brexit negotiations.
According to a new research recently released by the British Chambers of Commerce over half of UK businesses have not attempted to apply for finance over the past year amid limited investment intentions and weakening cash flow.
In particular, of the surveyed 1,100 firms from across the UK, over half (56%) of them did not attempt to access finance in 2017.
In fact, smaller firms were less likely to access finance than larger businesses. Almost two-thirds (63%) of small firms (1-9 employees) did not seek finance, compared just over a third (39%) of larger firms (50 or more employees) whilst just 4% of them sought crowdfunding.
Yet, the failure rate for companies that raised money online via crowdfunding is much lower than the average for start-ups, data from data house Beauhurst collected for the Telegraph reveals.
Indeed, if on the one hand 21% of startups which leveraged crowdfunding survived over the past five years, on the other data from the Office for National Statistics confirm that just under 50% of all new businesses fail after three years.
Suren Thiru, Head of Economics at the British Chambers of Commerce, said:
Accessing finance remains crucial to the lifeblood of a business, yet a decade on from the financial crisis these results suggest that we have moved from a credit crunch to credit apathy where a lack of demand, rather than supply of finance is now the overriding issue.
What to do then? According to experts’ view, this weak demand means that firms are treading water rather than going for growth, which is undermining the UK’s growth prospects.
Of help it could be giving
companies the financial room to grow and clarity on Brexit and we’d see more long-term investment coming through, Thiru concludes.