The proportion of UK businesses engaging in new borrowing or credit arrangements has doubled over the past year, as firms navigate persistent cost pressures and prioritise investment in technology and productivity, a new survey suggests.
Research conducted by HSBC UK indicates that approximately 56% of business leaders reported taking on new finance in the last 12 months. This figure marks a substantial increase from 28% in the preceding year, suggesting a significant surge in demand for commercial lending across the country.
The survey, which gathered insights from over 1,000 leaders within UK businesses, highlights a complex financial landscape. Many firms have contended with an array of rising expenses, including heightened inflation, increased utility charges, and growing labour costs. Furthermore, a surge in fuel costs, attributed to the ongoing conflict in the Middle East, has added to operational burdens.
In response to these challenges, the bank’s survey found that reducing costs remains a primary strategic objective for the majority of businesses, with 82% identifying it as a key priority. Maintaining robust cashflow and liquidity also featured prominently, being prioritised by 79% of respondents.
James Cundy, head of mid-market corporates at HSBC UK, acknowledged the immediate necessity for some firms to secure borrowing for operational stability. "Some businesses will have borrowed to manage ongoing cost pressures," Mr Cundy stated, underscoring that cost management and liquidity continue to be critical considerations for management teams.
However, Mr Cundy also pointed to an evolving dynamic in borrowing motivations. "Evidence suggests that investment is becoming an increasingly important driver of borrowing demand," he commented. This indicates a shift beyond mere crisis management, towards strategic growth and modernisation.
The survey detailed several key areas of investment fuelled by this new finance. Many businesses are reportedly channelling funds into enhancing productivity through technological advancements and upskilling their workforce. Other firms are leveraging finance to pursue consolidation opportunities, aiming to strengthen their market position through mergers and acquisitions.
According to the research, businesses with an explicit focus on growth were particularly likely to seek new finance, often earmarking these funds for mergers and acquisitions activity. For the wider business community, the top planned uses of finance included investment in digital technology, research and development (R&D), new product launches, and expansion into new markets.
These findings align with broader economic observations. Recent business surveys have consistently identified investment in advanced technologies, such as artificial intelligence (AI), as bright spots against an otherwise challenging economic backdrop for businesses. The latest figures for UK Gross Domestic Product (GDP) further supported this trend, indicating that a boom in AI spending was a key contributor to national growth in July. A notable proportion of businesses recording the largest turnovers during this period were identified as being involved in activities related to AI and cloud computing.
The HSBC UK survey therefore portrays a dual motivation behind the surge in business borrowing: a defensive posture against escalating costs and a proactive drive towards technological adoption, productivity gains, and strategic growth.
