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Entrepreneur
3 days ago
- Business
- Entrepreneur
Should You Borrow Now or Wait?
Opinions expressed by Entrepreneur contributors are their own. You're reading Entrepreneur United Kingdom, an international franchise of Entrepreneur Media. UK interest rates remain at a 16-year high. Inflation is finally easing, but the economic outlook is still uncertain. For many small and medium-sized businesses, 2025 has become a year of financial limbo, a moment to pause and ask a critical question: Should we borrow now, or hold off and wait for better conditions? The answer isn't straightforward. On one hand, business confidence is slowly returning, with growing demand for larger loans to fund expansion, relocation, and recovery. On the other, the cost of borrowing remains steep, and lenders are still cautious about who they approve. With the landscape changing fast, knowing when to make your next move and how to prepare for it could make all the difference. Interest Rates Are Likely to Fall, But Not Dramatically After holding steady at 5.25% from August 2023 to May 2025, the Bank of England reduced the base rate to 4.25% on the 8th of May 2025. This marks the first cut in nearly a year, and a one per cent decline over the past 12 months. While this is welcome news for borrowers, experts are warning against expecting dramatic changes. Inflation remains at 3.4%, still above the banks 2% target, and future rate cuts are expected to be gradual. "We think the Bank Rate will be cut to 3.75% by mid-2026," says Ruth Gregory, Deputy Chief UK Economist at Capital Economics. For SMEs considering whether to borrow now or wait, this means potential savings may be marginal, especially when set against time-sensitive opportunities like growth, relocation, or acquisitions. Demand for Funding Is Starting to Rise Again Despite high rates, some businesses aren't waiting. Iwoca's Q1 2025 SME Expert Index found that 42% of brokers expect demand for loans over £100,000 to increase this year, particularly among businesses looking to expand or relocate. At the same time, net lending to SMEs fell by £1.2 billion in Q1 2025, according to the Bank of England, showing that while some SMEs are still hesitant to borrow, others are taking advantage of less competition. If rates begin to fall later this year, as many expect, lenders may receive a flood of applications. Businesses that wait too long could find themselves up against more applicants and tighter lending criteria when they finally decide to act. Expansion Opportunities Might Not Wait for Cheaper Money Some of the best growth opportunities appear in periods of uncertainty. Whether it's securing a discounted lease, acquiring a struggling competitor, or investing in undervalued assets, timing is everything, and in many cases, delaying a decision for marginally cheaper borrowing could mean missing out altogether. "A lot of SMEs wait for the 'perfect' conditions, but by the time they arrive, the opportunity's gone," says Callum Scott, Managing Director at Winchester Corporate Finance. In this context, SMEs with strong growth plans may benefit more from acting early than holding out for small rate drops. Cheaper borrowing can be helpful, but it's no substitute for momentum or market opportunity. Lenders Are Looking for Financial Discipline, Not Just Ambition Even as some lenders start to open their books again, they remain cautious. The British Business Bank reports that only 43% of smaller businesses secured external finance in 2024, down from 50% in 2023. Among those referred to alternative lenders through the UK's bank referral scheme, success rates are still very low. Meanwhile, the Federation of Small Businesses says that 1 in 3 loan applications are rejected due to poor preparation or unclear financials. Lenders want more than a promising growth story; they want to see clean, well-managed accounts and a clear repayment strategy. If you're not confident about your business's financials, from cash flow to forecasts, this may be a good time to pause, plan, and get lender-ready before you apply. That means tightening up your balance sheet, cutting reliance on overdrafts, and forecasting realistically. Being 'Funding Ready' Takes Time, Start Now Either Way Whether you're planning to borrow in the next quarter or not until 2026, the groundwork for a successful funding application needs to start well in advance. Many SMEs only start preparing when they urgently need cash, but by that point, it's often too late to tidy up the numbers or resolve red flags. Lenders want to see consistency and control. That means reducing reliance on short-term fixes like overdrafts, paying suppliers on time, staying up to date with Companies House filings, and having a clear, realistic plan for how the funding will be used and repaid. These aren't just one-off actions; they reflect how your business is run day to day. "Being lender-ready isn't about box ticking, it's about financial habits," says Callum Scott. "If your accounts are solid, your forecasts make sense, and your repayment strategy is clear, you're already ahead of most applicants." Even if you choose to hold off on applying for now, laying that financial foundation puts you in a stronger position when the time comes. It can also help you move faster when opportunities arise without scrambling to fix things at the last minute. For some businesses, the right time to borrow is now. For others, it's later. But in both cases, the smartest move is to start preparing today. Because when the moment comes, the businesses that succeed won't necessarily be the ones that waited; they'll be the ready ones.
Yahoo
18-06-2025
- Business
- Yahoo
UK inflation eases slightly to 3.4% as food price rises offset transport cost falls
Inflation in the UK eased slightly to 3.4% last month as a steep fall in air fares and petrol prices was offset by a jump in the cost of food. May's decline in the consumer prices index (CPI), down from the official figure of 3.5% for April, complicates the Bank of England's interest rates decision on Thursday, although policymakers are still almost certain to hold interest rates at 4.25%. Annual food inflation jumped to 4.4% in May from 3.4% in April, spurred by increases in the cost of sugar, jam and chocolate, which rose at the fastest pace since records began in 2016. Poor harvests affecting major cocoa-producers in Ghana and Ivory Coast sent chocolate prices soaring 17.7%. Ruth Gregory, the deputy chief UK economist at Capital Economics, said rising food prices would be a concern to the Bank, especially when some staples such as meat were also pushed higher. 'The third consecutive rise in food price inflation to 4.4%, its highest since February 2024, will be a bit of a blow for the Bank as it perhaps provides a tentative sign that firms are passing on more of April's rise in national insurance contributions in their selling prices.' As well as food getting more expensive, furniture and household items also went up, increasing the rate of inflation for goods in shops from 1.7% in April to 2% last month, despite the cost of clothing and footwear declining by 0.3% over the past year. Interactive The Office for National Statistics said its measure of core inflation, which excludes volatile items such as energy, food and alcohol, rose by 3.5% in the last year, down from 3.8%. City economists had correctly predicted last month's fall in CPI to 3.4%, which was largely owing to falls in the price of petrol and diesel, which brought down transport costs. The Bank's target for the measure is 2% and May's reading is likely to leave policymakers circumspect about accelerating the pace of interest rate cuts. The ONS said earlier this month that it had overestimated its CPI reading for April by about 0.1 percentage points because of an error that meant the effect of higher car tax bills was exaggerated. It left the original reading in place as the official figure for that month, but said it would use the correctly weighted data in future calculations. Air fares tumbled in May from an increase of 16.2% in April to -3.9% in May, although this was largely because Easter – when airlines traditionally raise fares – fell a month later this year, in April rather than March. Services inflation, which has remained high over recent years, began to slow more rapidly, down from 5.4% to 4.7%. The Bank has resisted making steep cuts to interest rates while services inflation has remained sticky. Pressure has increased on the central bank to cut the cost of borrowing, after recent data showed the economy has slowed. Wages growth fell and unemployment increased in the February-to-April quarter, while the economy shrank in April. Monica George Michail, an associate economist at the National Institute of Economic and Social Research, said inflation was likely to remain above 3% for the rest of the year amid persistent wage growth and the inflationary effects from higher government spending. 'Additionally, the current tensions in the Middle East are causing greater economic uncertainty. We therefore expect the Bank of England to keep rates on hold this Thursday and implement just one further cut this year,' she said. The chancellor, Rachel Reeves, said there was 'more to do' to bring down inflation and support households hit by the high cost of living. She is keen for the Bank to accelerate the pace of interest rate cuts to ease monthly mortgage costs and reduce the cost of borrowing for businesses. Financial markets still expect two rate cuts to 3.75% by the end of this year and several more next year as inflation is expected to drift back to 2%, although the Bank has been reticent to indicate where interest rates may settle. Reeves said: 'We took the necessary choices to stabilise the public finances and get inflation under control after the double-digit increases we saw under the previous government, but we know there's more to do. 'Last week we extended the £3 bus fare cap, funded free school meals for over half a million more children and are delivering our plans for free breakfast clubs for every child in the country.' The shadow chancellor, Mel Stride, blamed Labour for inflation remaining above the Bank's target. 'Labour's choices to tax jobs and ramp up borrowing are killing growth and stoking inflation, making everyday essentials more expensive,' he said. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Time of India
03-06-2025
- Business
- Time of India
Mortgage approvals in UK drop to lowest in over a year after tax break ends
LONDON: The number of mortgages approved by British lenders for house purchase fell more than expected in April to their lowest in over a year as the market adjusted to higher purchase taxes. Earlier government data showed that British house purchases surged in March to take advantage of the final month of an exemption from stamp duty land tax for many buyers, before slumping in April when the tax reverted to its normal rate. Mortgage approvals - which are typically given at least a month before a purchase completes - fell to 60,463 in April from a downwardly revised 63,603 in March. This was the lowest total since February 2024 and below economists' expectations in a Reuters poll of a smaller fall to 63,000. Net mortgage lending fell by 759 million pounds ($1.03 billion) in April - the largest monthly drop since January 2024 - after a 12.957 billion pound rise in March. This weakness may prove temporary. Earlier on Monday, Nationwide Building Society - Britain 's second-largest mortgage lender - reported faster than expected house price growth in May and said underlying demand remained strong due to low unemployment and wages outstripping inflation. However, consultancy Capital Economics said April's drop represented the third consecutive drop in mortgage approvals and the decline might not all be due to buyers bringing forward purchases to beat the tax deadline. Ruth Gregory, Capital's deputy chief economist, said she saw downside risks to her forecast of 3.5% annual house price growth for the fourth quarter of 2025. Nationwide's data showed prices up 3.5% in the year to May. The BoE data also showed unsecured consumer lending rose by a net 1.580 billion pounds - above economists' 1.1 billion pound forecast - and the annual growth rate rose to 6.7% from March's 6.2%, the fastest growth since October 2024. Capital viewed this as a sign that British domestic consumer demand remained strong despite downbeat headlines in April around U.S. President Donald Trump's tariff plans, while KPMG interpreted it as evidence that households had come under strain from an outsize rise in household bills in April.
Daily Record
26-05-2025
- Business
- Daily Record
Experts warn tax rises ‘feel inevitable' at Autumn Budget after jump in Uk Government borrowing
Income tax bands are different in Scotland, but the Personal Allowance of £12,570 is universal across the UK. Economists have said that tax increases from the Chancellor later this year 'feel inevitable' after UK Government borrowing jumped last month. The Office for National Statistics (ONS) said public sector net borrowing rose to £20.2 billion, its fourth-highest April figure on record, mounting further pressure on Chancellor Rachel Reeves to meet her fiscal rules. The state borrowing figure reflects the difference between UK Government spending and its income, largely through tax receipts. The latest figure showed that the Chancellor had to borrow more money than expected over the month, surpassing analyst predictions of £17.6 billion. It comes as Rachel Reeves seeks to meet her fiscal rule of balancing day-to-day spending with revenues by 2029/30, while improving public services and targeting accelerated economic growth. Economists have said the increased deficit, plans to increase defence spending and the U-turn on Winter Fuel Payments could indicate future tax rises are needed to balance the state finances in the longer term. Ruth Gregory, deputy chief UK economist at Capital Economics, said: 'April's public finances figures showed that despite the boost from the rise in employers' national insurance (NI) contributions, the fiscal year got off to a poor start. 'With the PM announcing a partial U-turn on the cut to winter fuel payments, the dilemma faced by the Chancellor over how to deal with increased spending pressures in an environment of low economic growth and high interest rates hasn't gone away. 'With the markets seemingly uneasy about more public borrowing, further tax rises are starting to feel inevitable.' Matt Swannell, chief economic adviser to the EY Item Club, said higher borrowing and pressure from US tariff plans on economic growth could 'more than eliminate the slim headroom' against the rules. He said: 'A potential reversal of Winter Fuel Payment cuts and the likelihood that defence spending will need to rise again will make the fiscal arithmetic even more challenging and increase the pressure to generate more revenue through tax rises.' The rise in borrowing was largely linked to increases in public sector pay, National Insurance payments and higher benefits and State Pensions. The Labour Government announced earlier this year the Personal Allowance will remain frozen at £12,570 until the 2028/29 financial year. Central government departmental spending on goods and services rose by £4.2 billion year-on-year to £37.9 billion thanks to April pay increases and cost inflation. Meanwhile, social benefits paid by the state rose £1.3 billion to £26.8 billion after inflation-linked rises in many benefits. Public sector net debt was estimated at 95.5% of UK GDP (gross domestic product) at the end of April 2025, meaning the proportion of debt was 0.7 percentage points higher than a year earlier and remains at levels last seen in the early 1960s. The deputy director for public sector finances at the ONS, Rob Doody, said: 'At £1 billion higher than the same time last year, this April's borrowing was the fourth highest for the start of the financial year since monthly records began more than 30 years ago. 'Receipts were up on last April, thanks partly to the higher rate of national insurance contributions. However, this was outweighed by greater spending, due to rising public services' running costs and increases in many benefits and state pensions.' On Thursday, the ONS also revised down its borrowing figure for the latest fiscal year, to March 2025, by around £3.7 billion to £148.3 billion after receiving more information on tax receipts. It was still around £11 billion above the forecast set by the UK Government's official forecaster, the Office for Budget Responsibility. Chief secretary to the Treasury Darren Jones said: 'After years of economic instability crippling the public purse, we have taken the decisions to stabilise our public finances, which has helped deliver four interest rate cuts since August, cutting the cost of borrowing for businesses and working people. 'We're fixing the NHS, with three million more appointments to bring waiting lists down, rebuilding Britain with our landmark planning reforms and strengthening our borders, delivering on the priorities of the country through our Plan for Change.'
Yahoo
22-05-2025
- Business
- Yahoo
FTSE 100 slides after jump in UK Government borrowing
The FTSE 100 slumped on Thursday after new data showed UK Government borrowing surged higher than expected last month. London's blue-chip index ended the day down 47.20 points to finish the day at 8,739.26, a 0.54% fall. Earlier in the day, official figures showed that public sector net borrowing in the UK soared above expectations to £20.2 billion, leading economists to predict that tax increases 'feel inevitable' later this year. The state borrowing figure reflects the difference between Government spending and its income, largely through tax receipts. Ruth Gregory, deputy chief UK economist at Capital Economics, said: 'April's public finances figures showed that despite the boost from the rise in employers' national insurance contributions, the fiscal year got off to a poor start. 'With the PM (Prime Minister) announcing a partial U-turn on the cut to winter fuel payments, the dilemma faced by the Chancellor over how to deal with increased spending pressures in an environment of low economic growth and high interest rates hasn't gone away. 'With the markets seemingly uneasy about more public borrowing, further tax rises are starting to feel inevitable.' In Europe, Germany's Dax fell 0.47% and France's Cac 40 fell 0.58%. On Wall Street, the S&P 500 was up 0.15% as UK markets were closing, while the Dow Jones was up 0.12%. Sterling was up 0.04% against the US dollar at 1.3424, while it was 0.5% up against the euro at 1.1901. In company news, BT's share price jumped higher after the telecoms giant said it was on track to deliver its major cost-cutting programme and had made more than £900 million annual savings so far. The firm said underlying earnings rose 1% to £8.21 billion in the year to the end of March, as cost savings helped offset a 2% fall in revenues. It is forecasting earnings to be broadly flat over the next financial year, between £8.2 billion and £8.3 billion. BT shares closed 3.6% higher. Elsewhere, Bloomsbury shares plummeted by a fifth after the publisher revealed its pre-tax profits slipped by 22% to £32.5 million for the year to the end of February, compared with the previous year. This was despite revenues rising by 5% year-on-year, as it benefited from expanding its consumer portfolio, and its non-consumer division was boosted by the acquisition of US publisher Rowman & Littlefield. Bloomsbury shares were down 19.5% at close. The biggest risers on the FTSE 100 were Hiscox, up 90p to 1284p, BT, up 6.1p to 175.35p, Pershing Square, up 130p to 3,856p, Beazley, up 30.5p to 949.5p, and Marks & Spencer, up 9.3p to 384p. The biggest fallers on the FTSE 100 were DCC, down 234p to 4,540p, Intermediate Capital, down 86p to 1,982p, Diageo, down 72p to 2,061p, Intertek, down 162p to 4,758p, and Kingfisher, down 9.9p to 300p. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
