UK tech firms face financial obstacles to scaling growth

A recent research study by business advisory and accountancy firm Menzies reveals significant financial challenges hindering growth within the UK tech sector.

The report, based on a survey of more than 500 business leaders across the United Kingdom, highlights that many tech companies are facing substantial financial barriers, with 90% of them encountering challenges when trying to scale. High operational costs were cited by 31% of respondents as a major factor stalling their growth.

In addition to operational costs, securing investment has proven difficult, with 42% of tech businesses finding it hard to obtain funding from private equity and other sources, the report showed. A similar proportion, 31%, expressed struggles in accessing lending.

The financial complexities of scaling are also a concern, as over 21% of respondents are having difficulty navigating these challenges. For some, managing finance and funding is a significant distraction, with 15% identifying it as their primary diversion from other business activities.

Stephen Hemmings, Partner and Head of Technology Sector at Menzies, commented on the issue, "The tech sector is critical to the UK's economic future, yet scaling businesses say they face substantial obstacles to achieving sustainable growth.

"Preparing to scale requires tech businesses to address a unique set of financial challenges," he said.

Hemmings further explained the potential solutions, stating, "Opportunities do exist, and tech leaders must explore all funding options. Private equity, for instance, is often overlooked due to fears around control, yet it can unlock growth and provide valuable expertise.

"Many tech leaders also underestimate the importance of aligning financial planning with operational agility," he said.

"Demonstrating how funding will translate into scalable infrastructure or new revenue streams can make the difference when approaching investors or lenders," Hemmings said.

He also noted, "Moreover, as businesses grow, financial complexity increases. Leaders often find themselves balancing short-term funding needs with long-term strategic goals – this needs careful management to avoid being a barrier to growth.

"Menzies works closely with tech leaders to develop robust business plans, streamline financial operations, and secure the capital they need to make the leap to large enterprises with confidence," Hemmings said.

To assist tech leaders in overcoming these challenges, Menzies has developed a guide titled 'Are you ready for The Greatest Leap: How to accelerate your business ambitions'. According to the company, the guide aims to provide tech business leaders with practical advice and strategies to navigate this crucial growth phase.