Business leaders in London are delaying exit plans to ensure their companies are geared up to survive the UK’s impending economic downturn, according to new research.
In a poll of 283 UK business owners, founders and directors, well over half (58%) said the state of the economy had forced them to push back plans to handover the day-to-day running of their company, sell their business, or retire.
The findings follow recent figures from the Office for National Statistics that show the UK economy shrank by 0.3% between August and October.
The study, carried out by the corporate practice at UK top-100 law firm Moore Barlow, found that one in 3 (31%) business leaders in the capital plan to sell in the next five years.
Despite this, the vast majority (70%) plan to invest in growth over the next year even though only a little more than half (54%) increasing cash flow in the last 12 months.
But with cash reserves hit by the pandemic and ongoing economic turbulence, firms are looking to external investment to provide the capital they need for expansion. Almost all respondents (96%) said they plan to take on some form of external investment over the next 12 months, including asset finance (37%), crowdfunding (28%), and venture capital and private equity (24%).
Jeremy Over, partner and head of corporate at Moore Barlow, said, “Businesses are being optimistically sensible in the face of quite daunting challenges. A steady hand on the tiller seems, more often than not, the best way to navigate choppy economic waters so it’s understandable to see many owners pressing pause on plans to exit.
“Businesses leaders do need to be mindful that tackling the immediate dangers they face doesn’t mean losing site of their long-term vision for the business. Even if delaying plans to exit, identifying and molding that next generation of company directors still needs to be a priority. Likewise, external investment is often the shot in the arm a business needs, but firms must still do their due diligence when it comes to taking on funding and ensure their new partner’s ambitions line up with their own.”