Despite high levels of business confidence, many firms remain concerned about red tape and cash flow as their two biggest barriers to growth.
According to the Albion Growth Report 2014, from Albion Ventures, 26% of companies cite red tape as their biggest barrier to growth.
This is down from 29% a year ago, but matches the 26% of firms who say the administrative and cost burdens associated with red tape have significantly increased over the past two years.
Meanwhile, cash flow ranks in second place, with 21% of respondents citing this as a major challenge – and it seems the smaller you are, the harder it is to stay afloat.
Among companies with more than 50 employees, 12% cite cash flow as a major concern; but among sole traders this doubles to 25%.
Communications firms and transport companies see cash flow as the biggest obstacle in sector-specific terms, and Albion Ventures suggest that this is an indicator of the ‘cash-hungry nature’ of those sectors’ approach to growth.
But Patrick Reeve, managing partner of Albion Ventures, says it is ‘threshold’ companies with turnover between £500,000 and £1 million who may be hit hardest by issues like cash flow.
“All the pressures created by growth are magnified and thrown into stark relief in those companies moving through this particular stage of transition,” he writes in the report. “For them, cash is tight and they need finance for growth.”
In many cases, access to finance means relinquishing some of the equity in their companies, opening up more opportunities for investors.
“Thus it is these threshold companies, which are on the cusp of the breakthrough in growth, which will be helping to drive the UK’s economy forward in the years ahead,” Mr Reeve concludes.