UK Corporate Borrowing Doubles as Businesses Face Rising Costs and Investment Pressures

Key Points

• Corporate borrowing has increased sharply: 56 per cent of UK business leaders said their companies had taken on new borrowing or credit arrangements over the previous 12 months, compared with 28 per cent in 2025, according to research by HSBC UK.
• Cost pressures remain a major concern: Businesses are dealing with persistent inflation, higher utility bills, rising labour costs and increased fuel prices following the conflict in the Middle East.
• Cash flow protection is a priority: 82 per cent of businesses identified reducing costs as a strategic objective, while 79 per cent prioritised protecting cash flow and liquidity.
• Borrowing is supporting both survival and growth: Some companies are using external finance to manage operating expenses, while others are funding technology, research, workforce development and expansion.
• Artificial intelligence and digital technology are attracting investment: Businesses are seeking productivity improvements through technology, including AI and cloud computing-related activities.
• Mergers and acquisitions remain an important consideration: Some growth-oriented businesses are seeking finance to pursue consolidation opportunities and strengthen their market positions.
• Corporate finances remain under pressure: The rise in borrowing highlights the challenge of balancing immediate financial obligations with longer-term investment and expansion plans.

The most important development is the sharp increase in corporate borrowing, followed by the cost pressures driving demand for finance and the implications for business investment and financial resilience.

Britain Post News (BPN) October 12, 2026 – UK businesses are increasingly turning to borrowing and credit arrangements as they face mounting operating costs and seek funding for investment. Research by HSBC UK found that 56 per cent of business leaders had taken on new borrowing or credit arrangements during the previous 12 months, double the 28 per cent recorded in 2025. The findings, based on a survey of more than 1,000 business leaders, highlight the financial pressures affecting companies across the UK economy. With inflation, utility bills, labour expenses and fuel prices weighing on budgets, businesses are prioritising cost reduction and cash flow protection while continuing to invest in technology, research and expansion. The figures also indicate that external finance is serving different purposes, from meeting immediate financial obligations to supporting longer-term growth.

Why Has Corporate Borrowing Increased Among UK Businesses?

The latest HSBC UK research indicates a substantial increase in the proportion of business leaders reporting new borrowing or credit arrangements over the past year.

In 2025, 28 per cent of surveyed business leaders said their companies had taken on new borrowing or credit. In the latest findings, that proportion reached 56 per cent, representing an increase of 28 percentage points and a doubling of the reported share.

The survey covered more than 1,000 business leaders and examined the financial priorities and investment decisions shaping corporate activity.

The figures suggest that businesses are relying more heavily on external finance at a time when managing operating expenditure has become increasingly important. However, the results do not establish that every company is borrowing because it is experiencing financial distress.

Borrowing can serve several purposes. Businesses may use credit to cover temporary gaps between payments and receipts, finance equipment purchases, develop new products or fund expansion. Others may require additional working capital to manage higher costs while waiting for revenue to catch up.

The survey findings therefore point to a broad increase in demand for finance rather than a single explanation for the change.

They also highlight the importance of distinguishing between borrowing used to support routine operations and finance directed towards productive investment. Although both increase a company’s financial obligations, their potential effects on future revenue and business performance can differ significantly.

What Financial Pressures Are UK Companies Facing?

According to the research, businesses are operating in an environment shaped by persistent inflation, higher utility bills, rising labour costs and increased fuel prices following the conflict in the Middle East.

These expenses can affect companies through several channels. Higher energy bills increase the cost of running offices, warehouses, factories and other facilities. Rising labour costs can place additional pressure on employers, particularly those operating in labour-intensive sectors.

Fuel price increases can also affect transport, logistics and distribution expenses. Businesses that depend on regular deliveries or extensive supply chains may face additional costs when transporting goods and materials.

Persistent inflation can compound these pressures by increasing the cost of supplies, services and other business inputs. Companies may attempt to pass some of these increases on to customers, but their ability to do so depends on competition, demand and the sensitivity of customers to higher prices.

Where businesses cannot increase prices sufficiently, their profit margins may narrow. Companies can then face difficult decisions about recruitment, investment, operating expenditure and financing.

Borrowing can provide temporary flexibility by allowing firms to meet obligations without immediately cutting expenditure or delaying essential projects. However, it also creates repayment commitments and may increase interest expenses, depending on the type of financing and the terms agreed with lenders.

The scale of the reported increase in borrowing therefore places renewed attention on how businesses manage the relationship between operating costs, revenue, available cash and debt obligations.

Why Are Businesses Prioritising Cost Reduction and Cash Flow?

The HSBC UK survey found that 82 per cent of businesses identified cost reduction as a strategic priority. Meanwhile, 79 per cent said protecting cash flow and liquidity was a key focus.

These figures demonstrate the importance of financial resilience in corporate decision-making.

Cost reduction can involve reviewing supplier contracts, improving energy efficiency, streamlining administrative processes and examining whether existing operations are using resources effectively. Businesses may also review their technology systems, staffing arrangements and distribution networks to identify potential savings.

However, reducing expenditure does not necessarily mean cutting investment indiscriminately. Companies may seek to eliminate inefficiencies while continuing to fund projects expected to improve productivity or strengthen their competitive position.

Cash flow management presents a separate but closely related challenge. A business can record sales and still encounter financial pressure if customers pay late, suppliers require earlier payment or expenditure rises faster than receipts.

Liquidity refers to a company’s ability to meet its short-term financial obligations using available cash and other readily accessible resources. Maintaining adequate liquidity can help businesses pay wages, suppliers, rent and other essential costs when they fall due.

The survey’s findings indicate that many management teams are concentrating on these immediate financial requirements while considering longer-term commercial opportunities.

For companies using borrowing to support liquidity, the effectiveness of that strategy will depend partly on whether the additional finance addresses a temporary timing problem or a more persistent imbalance between income and expenditure.

What Did HSBC UK Say About Business Financing?

James Cundy, head of mid-market corporates at HSBC UK, said that some businesses had turned to borrowing to manage continuing cost pressures.

He identified cost management and liquidity as important priorities for management teams but also highlighted investment as an increasingly significant reason for seeking finance.

Cundy said businesses were directing investment towards productivity improvements through technology and workforce skills. Others, he explained, were using finance to pursue consolidation opportunities and strengthen their market positions.

His comments indicate that demand for corporate finance is not exclusively associated with rising expenses. Some companies are also seeking funding to make operational improvements or pursue strategic opportunities.

Investment in workforce skills can help employees adapt to new systems, improve processes and make more effective use of technology. Technology spending can support automation, data analysis and more efficient delivery of products and services.

Consolidation, meanwhile, can allow businesses to pursue mergers and acquisitions, expand their customer base or combine operations. Such transactions may create opportunities to increase scale, although their eventual results depend on factors including purchase costs, integration and the performance of the businesses involved.

Cundy’s remarks provide context for the survey results, but they do not establish that all businesses taking on new borrowing are following the same strategy.

The distinction matters because the financial requirements of a company managing an immediate cash shortage can differ considerably from those of a business borrowing to acquire another company or develop a new product.

Which Investment Priorities Are Driving Demand for Finance?

The survey identified several investment priorities across the wider business population, including digital technology, research and development, product launches and expansion into new markets.

These activities can require substantial expenditure before they generate additional revenue. Businesses may need to purchase equipment, hire specialists, develop products, test new systems or establish relationships with customers and suppliers in unfamiliar markets.

External finance can help spread the cost of such projects over time rather than requiring companies to fund all expenditure from existing cash reserves.

Digital technology is particularly relevant to businesses seeking to improve productivity and operational efficiency. Investment may involve upgrading existing systems, adopting cloud-based services, automating routine tasks or improving the way information is managed.

Research and development can support the creation of new products, processes and services. However, these projects often involve uncertainty because development costs may arise well before commercial success can be established.

Product launches and entry into new markets can also require expenditure on distribution, marketing, staff and regulatory requirements. Businesses must assess whether anticipated demand and potential returns justify the financing costs and risks involved.

The survey suggests that some companies are attempting to preserve their ability to grow despite pressure on current operating budgets.

The challenge is to ensure that investment decisions remain commercially sustainable. Businesses need to consider not only the potential benefits of a project but also its timing, funding requirements and implications for future repayments.

How Are Artificial Intelligence and Cloud Computing Influencing Investment?

Technology investment has remained an important area of activity amid wider economic difficulties, particularly as companies explore ways to improve productivity through artificial intelligence.

The supplied report notes that recent UK gross domestic product figures showed AI-related spending helped drive growth in July. It also states that businesses recording some of the largest turnovers were identified as operating in activities associated with AI and cloud computing.

These observations place technology investment within the broader discussion about the role of digital infrastructure in economic activity. They do not, on their own, establish how much of the overall increase in corporate borrowing can be attributed to AI.

Businesses can use AI-based systems for a range of functions, including processing information, supporting customer services and assisting with routine administrative tasks. Cloud computing can provide access to computing resources and software without requiring every business to maintain all the necessary infrastructure independently.

For companies facing higher labour and operating expenses, technology may offer opportunities to improve the amount of work completed with existing resources.

However, adopting new systems can involve implementation costs, staff training, data management requirements and ongoing service charges. Productivity gains are not automatic, and companies must assess whether the benefits justify the initial and recurring expenditure.

Finance can help businesses meet these costs, but investment decisions need to reflect the company’s financial position and the likely time required to realise returns.

For smaller firms in particular, the commercial value of technology may depend on selecting solutions that address clearly identified operational problems rather than investing solely because a technology is attracting wider attention.

Why Are Mergers and Acquisitions Important to Corporate Borrowing?

The HSBC UK findings indicate that businesses pursuing growth were more likely to seek new finance, with mergers and acquisitions among the intended uses of funds.

Mergers and acquisitions can enable companies to enter new markets, acquire specialist capabilities, expand their customer base or increase their operational scale.

External finance may be required to fund a transaction, support integration or provide working capital while the combined business adjusts to new arrangements.

Companies considering acquisitions must assess the purchase price, the financial condition of the target business and the expected benefits of combining operations. They must also consider the cost of financing and whether future cash flows will be sufficient to support repayments.

Higher operating costs can complicate these decisions. A company may identify a promising acquisition opportunity but face greater uncertainty about its future financial position because energy, labour or transport expenses have increased.

Financing conditions can also influence the viability of a transaction. Where borrowing becomes more expensive or lenders impose stricter conditions, the overall cost of an acquisition may rise.

Nevertheless, companies with sufficient financial capacity may continue to pursue consolidation as a means of strengthening their market position.

The survey findings show that corporate borrowing can support strategic expansion as well as the management of immediate expenses, reinforcing the need to examine the purpose of finance when assessing business debt.

What Does the Increase in Borrowing Mean for Business Financial Stability?

The rise from 28 per cent to 56 per cent in the share of surveyed business leaders reporting new borrowing or credit arrangements highlights the growing importance of financing decisions.

However, the proportion of businesses taking on new credit does not reveal the total value borrowed, the average debt held by each company or the terms attached to individual facilities.

It also does not establish whether businesses have experienced an increase in defaults, whether borrowing is affordable or whether their overall debt levels have become unsustainable.

Assessing financial stability requires a broader set of indicators, including revenue growth, profitability, interest expenses, debt repayment schedules and available cash.

A company may borrow to fund an investment that subsequently increases productivity and revenue. Another may rely on credit to cover rising costs without achieving sufficient growth to offset the additional financial burden.

The outcomes can therefore differ even when both companies report new borrowing.

Businesses must also consider how financing arrangements interact with future spending requirements. Borrowing that appears manageable under current trading conditions may become more difficult to service if sales weaken or costs rise further.

For lenders, the purpose of borrowing, the strength of a company’s balance sheet and its capacity to generate cash are important considerations when evaluating financing requests.

For business leaders, the findings underline the need to balance access to finance with realistic assessments of repayment capacity and the expected benefits of additional expenditure.

How Could Rising Borrowing Affect the Wider UK Economy?

The increase in corporate borrowing has implications for business investment and the wider economy, although the survey alone cannot determine the overall economic effect.

Access to finance can enable companies to continue operating through periods of cost pressure, maintain investment programmes and pursue new commercial opportunities. This may support economic activity where businesses use funds to improve productivity or expand operations.

Investment in technology, research and workforce skills can also contribute to changes in how efficiently businesses produce goods and deliver services.

However, borrowing used primarily to cover recurring operating shortfalls may provide less lasting benefit if the underlying cost pressures remain unresolved.

The economic effect will depend on how companies deploy the funds, whether their investments generate adequate returns and how successfully they manage their financial commitments.

The reported role of AI-related spending in July’s GDP growth, as described in the supplied report, illustrates the potential significance of technology expenditure. It does not mean that all technology investments will produce similar results or that the increase in borrowing directly caused that growth.

Businesses across different sectors will also face different conditions. Energy-intensive companies, transport operators, manufacturers and service providers may experience distinct combinations of cost increases and investment requirements.

Consequently, the aggregate borrowing figures should be interpreted as an indication of changing financing behaviour rather than a complete measure of the health of the UK corporate sector.

Background: What Has Driven the Shift Towards Greater Business Financing?

Business borrowing is a normal feature of commercial activity. Companies use credit facilities, loans and other forms of finance to manage working capital, purchase equipment, develop products and pursue expansion.

The financial significance of borrowing depends on the reason for the debt, its cost and the company’s ability to repay it.

The latest HSBC UK research places this established practice within a period of increased operating-cost pressure. Persistent inflation, higher utility and labour bills, and rising fuel prices have made cost management a central concern for the businesses covered by the survey.

At the same time, companies continue to face decisions about investment in digital systems, research and development, new products and market expansion.

The resulting financial landscape is divided between businesses seeking to protect their existing operations and those using external finance to pursue growth. Some companies may have both objectives simultaneously, attempting to maintain liquidity while funding projects intended to improve future performance.

The survey’s increase from 28 per cent in 2025 to 56 per cent in the latest findings provides a clear measure of the change in the proportion of business leaders reporting new borrowing or credit arrangements.

Nevertheless, the findings do not establish the precise amount of additional debt across the UK economy or demonstrate that every company is experiencing the same degree of financial pressure.

Understanding the longer-term consequences will require consideration of subsequent business performance, investment outcomes and the ability of companies to meet their financing obligations.

Prediction: How Could Higher Corporate Borrowing Affect UK Businesses and Their Employees?

The direction of corporate borrowing will depend on how operating costs, trading conditions, financing terms and investment returns develop.

If cost pressures remain elevated, businesses may continue to rely on credit to manage working capital and maintain essential operations. Companies with limited cash reserves could face difficult choices between borrowing, reducing expenditure and postponing investment.

Businesses that use finance for well-planned technology upgrades, workforce training or expansion may be better positioned to improve productivity and develop new revenue streams, provided their projects deliver the anticipated benefits.

AI and cloud computing investment could remain important to companies seeking operational efficiencies. However, the benefits will depend on implementation, employee training, business requirements and the costs of maintaining new systems.

For employees, the effects could vary between companies. Investment in skills and technology may create opportunities for training and new responsibilities, while businesses facing sustained financial pressure may review recruitment, staffing costs or other expenditure. The survey does