Access to finance is still the biggest barrier to starting and growing a business, according to research from Ernst & Young (EY).

Access to finance is still the biggest barrier to starting and growing a business, according to research from Ernst & Young (EY).

The survey conducted by EY showed that 50% of British entrepreneurs cite access to finance as the single biggest barrier to both setting up a new business and growing a startup.

An overwhelming majority of construction firms (90%) struggle with access to finance, whereas just a quarter a pharmaceutical companies see it as an issue.

Stuart Watson, EY’s Entrepreneur of the Year UK Leader, said: “Matching funding to business growth plans remains a key area of concern for ambitious entrepreneurs, not least as rapid growth tends to absorb cash. Entrepreneurial business leaders that develop strong controls over cash and cash forecasting as they grow find this enables them to plan early for fund raising and helps to attract investors.”

Asked about secondary funding sources, over a quarter (27%) of entrepreneurs said they would look to use their retained profit to grow their business and only a fifth responded that they would look to banks (21%). In contrast, just 16% said that private equity was an option; only 9% said they would consider an IPO and just 3% that they would choose venture capital as a source of secondary funding.

Entrepreneurs in the North are the champions of using their retained profit to grow their businesses, with nearly four out of ten (37%) choosing this option, while London based entrepreneurs would look at support from private equity (20%).

Mr Watson added: “There are a wide variety of options for funding growth, incentives and tax breaks for investors. However, these are often complex and take time to review. For busy entrepreneurs with businesses that need day to day leadership, it can be invaluable to bring in a mentor, non-executive director, or an adviser, that has been through the issues before. At a policy level, while there have been many initiatives in this area, the responses from our survey suggest that politicians should focus on how to encourage greater investment in the fast growth companies in the economy.”