UK companies raising less money amid recession fears

UK companies  A person walks across Waterloo Bridge with the City of London financial district in the background, in London, Britain, January 13, 2023. REUTERS/Henry Nicholls
UK companies are holding off investments amid recession fears. Photo: Henry Nicholls/Reuters

Companies raised less money through the markets as total gross capital issuance by all UK residents came in at £33.4bn in December, £26.5bn lower than in November, and also below the previous six-month average, according to latest figures from the Bank of England (BoE).

Total net capital issuance was £200m last month, compared to £10.9bn in November and the previous six-month average of £1.2bn.

Capital issuance means ways businesses have to raise money, either through issuing debt in the form of bonds or commercial paper, or equity, where companies secure funds through the sale of shares.

The capital issuance statistics published by the BoE consist of non-government primary market issuance of bonds, commercial paper and equity, representing finance raised by UK resident entities.

The central bank said the drop in capital issuance was driven by the fall in issuance of gross commercial paper which fell to £12.6bn in December, compared to £31.3bn in November and the previous six-month average of £20.6bn.

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The data also showed that gross bond issuance was £20.5bn in December, compared to £27.7bn in November, while gross commercial paper issuance stood at £12.6bn.

The decrease in net issuance in bonds was primarily driven by a drop across two major sectors – monetary financial institutions (MFI), and others financial corporations (OFC).

Companies fear the UK's impending recession could be deeper than previously thought.

Faced with a worsening situation, less government support and higher taxes, the economists said they thought each of the next three years could be worse than they had previously expected.

In October, EY’s Item Club had predicted a 0.3% contraction in gross domestic product (GDP) this year, followed by 2.4% growth next year and a 2.3% rise in 2025.

But in an updated forecast released on Monday, it said GDP would drop 0.7% this year, followed by growth of 1.9% and 2.2% over the next two years.

The figures also come as an industry body warned slow and unpredictable decisions by regulators are tarnishing the UK’s competitiveness on the global stage,

TheCityUK have issued a report that claims the Financial Conduct Authority (FCA) and Bank of England's Prudential Regulation Authority (PRA) are taking too long to vet finance firms, potentially discouraging investment.

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TheCityUK say that complex, opaque and slow authorisations, such as for a new chief executive or a new product, can discourage growth and investment.

They acknowledged that the FCA and the PRA are taking steps to speed up authorisations, but say further action is needed.

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