Smaller firms lead the way as debt levels drop across major sectors, according to new data from Opus Business Advisory.
UK businesses are reducing their reliance on external borrowing at a striking pace, with the latest analysis from Opus Business Advisory Group revealing a marked fall in debt levels across key sectors, despite a sluggish economy and persistent financial uncertainty.
The findings, which draw on Opus’s sector-level analysis of financial risk profiles over the last two to three years, show that small companies are driving the shift, cutting third-party debt faster than their larger counterparts in most industries.
“What’s remarkable is that in the face of rising costs, economic instability and sluggish growth, we’re seeing businesses, especially smaller ones, take bold action to strengthen their balance sheets,” said Nick Hood, Senior Business Adviser at Opus. “This is a conscious, strategic pivot away from borrowing dependency and towards more sustainable, organic growth models.”
Key Sector Trends
Among the headline figures:
- Retail saw the largest overall reduction in debt per company at 58%, with large retailers slashing debt by 60%.
- Construction small businesses cut their borrowings by a staggering 40%, compared to 11% for large firms.
- Manufacturing small companies reduced debt by 24%, against a more modest 5% fall among larger peers.
- The hospitality sector, particularly pubs, bars and restaurants, witnessed a 28% debt cut among small businesses, contrasting with a 7% increase among large firms.
| Sector | Debt Reduction per Company | Large Companies | Small Companies |
| Construction | 5% | 11% | 40% |
| Manufacturing | 20% | 5% | 24% |
| Logistics | 29% | n/a | n/a |
| Hotels | 31% | 30% | 22% |
| Pubs, Bars & Restaurants | 26% | -7% | 28% |
| Retail* | 58% | 60% | 13% |
Note: *The overall and large company figures for Retail are affected by the inclusion of significant banking operations in the balance sheets of certain major retail groups.
Note: *More information on the fall in borrowings of these sectors can be seen in a detailed schedule available on request. The reductions shown above cover either a three or a two-year time frame.
“The drop in borrowing is not just reactive, it’s proactive,” Nick added. “Companies are trying to future-proof themselves. This is about building resilience for what’s next, not just recovering from what’s already happened.”
Why Are Borrowings Falling?
Several factors underpin this emerging trend:
- Post-pandemic repayment obligations: 1.67 million companies took out £79 billion in government-backed COVID-19 loans, now coming due for repayment. (Source)
- Higher interest rates: Elevated borrowing costs are deterring new debt and forcing firms to pay down existing loans.
- Strategic balance sheet management: Many businesses are consciously opting for self-sufficiency and lower leverage to build stronger financial reputations.
- Shift to organic and sustainable growth: There’s growing aversion to over-leverage, especially in volatile sectors like retail and hospitality.
- Evolving corporate strategies: Companies are prioritising efficiency and productivity over aggressive expansion.
A Double-Edged Sword?
While reduced borrowing improves financial resilience, it may constrain the ability of UK firms to invest in growth and innovation, particularly in capital-intensive industries.
“The UK has long lagged behind on business investment,” Hood said. “While deleveraging makes balance sheets look better, it can also make growth harder to achieve. Companies will need to tread a fine line between prudence and progress.”
A New Era of Financial Strategy?
According to Opus, the trend could mark a permanent reset in how UK companies approach funding. With global volatility still high, cautious and strategic financial management is becoming the default.
“This may well be the beginning of a new mindset in corporate Britain where businesses aren’t borrowing their way to growth, but instead investing within their means,” said Nick. “That’s not just a financial shift; it’s a cultural one.”
