Two in three UK business owners are currently considering an exit strategy as fears grow about higher taxes depending on the result of a 2024 general election
A potential change in government and changes to tax rules have been cited as the top factors prompting business owners to accelerate their exit plans.
Nearly a quarter (23%) of business owners have already expedited their exit plans, with two in five (40%) businesses with turnover in excess of £5m planning to exit within the next year, shows research by Evelyn Partners. However, 36% said they had postponed their exit plans.
Exit plans have been fast tracked, with nearly a quarter (23%) of business owners having accelerated their plans to sell or wind down their business in the past 12 months.
The political landscape was the primary motivator for the decision to sell up, Evelyn Partners said. With a general election set to take place within the next 15 months and Labour having a commanding lead in the polls, concerns over a potential change in the UK government and subsequent changes to the tax regime were the top reason for business owners choosing to expedite their exit plans, cited by 25% of respondents to the survey.
Challenges accessing capital and long-term investment were another problem area. One in four (25%) business owners have been encouraged to sell due to ongoing challenges accessing long-term capital, while 18% cited the rising cost of capital as a key motivation to sell. A similar number (19%) said the withdrawal of a key investor was behind their decision.
Sales to private equity investors remained the most popular exit routes with one in five (20%) business owners looking to sell to private equity, with 11% planning to sell a minority stake and 9% a majority stake. This was closely followed by employee ownership trusts, which have grown in popularity.
Tom Shave, partner at Evelyn Partners, said: ‘As the general election nears, many business owners are concerned about the potential for tax changes, such as an increase in the rate of capital gains tax. Businesses also continue to face headwinds when it comes to their operations and long-term funding.
‘It is understandable that many business owners are viewing the current climate as an opportune time to realise the gains of their success. However, others have delayed their exit plans which is likely to be driven by current economic uncertainty and potential worries that they may not get the best price for their business, as evidenced by a slowdown in M&A activity.’
Personal factors are also at play, with 25% of business owners hoping to unlock the equity tied up in their business to deal with current personal finance challenges.
Shave added: ‘Setting up an employee ownership trust can be a swifter process than going to market and also enables business owners to retain greater control of the valuation of the business, compared with external exits where the business’ value is worth what the market is prepared to pay.’