In 2025, the economic landscape has shifted, and lenders are on high alert. Surging costs, shifting policies, and global uncertainties mean a comprehensive company credit report in 2025 reveals more than just a credit score. It’s a survival story. Here’s what lenders should zero in on when reviewing credit reports.
Lenders in 2025 are working in a climate of slow growth and rising uncertainty. The Bank of England has kept interest rates at 4.5%, trying to strike a balance between global instability and ongoing cost pressures at home. Inflation in the UK is still running above the 2% target, and economic growth is weak. Policymakers are understandably cautious about making big moves.
Globally, the story is similar. The IMF expects the world economy to grow by just 3.2% a year over the next five years, which is sluggish by historic standards. The quick post-Covid recovery is behind us. Now we’re looking at a long stretch of slow momentum.
The Bank of England’s Financial Policy Committee recently flagged that the global environment has become riskier. Serious shocks are more likely, and the outlook for growth is getting weaker. Tensions between major economies and the rise of trade barriers are making things worse. New tariffs introduced by Trump in early 2025 are already starting to affect export volumes and input costs, raising further concerns about supply chain fragility. If international cooperation breaks down further, it could drag growth even lower and make economies more vulnerable to disruption.
For the UK, that global volatility hits especially hard. The UK is a very open economy, meaning international risks quickly spill over. So far, banks and most borrowers have held up okay. But look closer and you’ll find weak spots, particularly among heavily indebted businesses that relied on cheap borrowing in the past.
In today’s environment, lenders need to be sharper than ever. Each lending decision must take into account the risk of another interest rate spike, supply chain shocks, or a demand slump. There’s not much room for error. And lenders know it.
If there’s one trend impacting small and mid-size firms in 2025, it’s rising costs. According to the Federation of Small Businesses (FSB), a whopping 85% of small firms saw their costs go up in the first quarter of this year. And nearly a quarter faced hikes of more than 10%. What’s driving the pressure? The usual suspects: energy bills, wages, and taxes. Put simply, everything costs more, and it’s eating into profits.
That’s left confidence among small businesses stuck deep in the red. While things have picked up slightly since the end of 2024, the FSB’s confidence index still sits at –40.7, showing just how tough conditions remain.
Mid-sized firms aren’t escaping the squeeze either. Inflation and higher interest rates have combined to hit them hard. Research by BDO shows a sharp rise in Zombie companies i.e. businesses that are only just covering their loan interest, with nothing left to invest or grow.
Around 16% of UK mid-market businesses (those with turnover between £10 million and £500 million) now fall into that category, up from 12% last year. That’s roughly one in six firms on the brink, staying afloat largely due to leftover cheap credit.
BDO also notes that rising costs have chipped away at profit margins, damaging business models that once looked solid. And more financial strain is on the way. April 2025 and onwards, employers face higher National Insurance contributions and increased minimum wage costs, which will hit bottom lines even harder.
On the surface, it might not seem so bad. Official data even showed a small dip in company insolvencies in 2024 compared to the previous year. But don’t be fooled; that could just be the eye of the storm. With pressure mounting, a rise in failures later this year wouldn’t be surprising.
For lenders, this all means one thing: take a close look at every company credit report. Are profits shrinking? Is the firm still comfortably covering its interest payments, or just barely scraping by?
If earnings are only just enough to cover interest, that’s a major warning sign. Many of today’s fragile companies have hung on thanks to forgiving lenders and the last of the low-rate loans. But that safety net is gone.
If a borrower’s credit report shows thin margins and heavy debt, it’s time to dig deeper. Proceed with caution.
In this economic climate, smart lenders don’t stop at a surface level company credit check. They dig into the details. A company credit report in 2025 is more than just a rating. It’s a window into how a business is really doing under pressure.
Here are a few warning signs to look out for in your next company credit report:
Is the business running out of cash? That’s often one of the first signs of deeper problems. If cash reserves are shrinking and the current ratio (short-term assets vs. liabilities) is heading south, it’s a red flag. You might also see signs of the company delaying payments to suppliers, which is a classic sign they’re trying to conserve cash.
There’s hard data backing this up. Right now, only about half of small business loan applications in the UK are being approved, and nearly half of those are just to plug cash flow gaps, not for growth or investment. If a borrower is stuck in that cycle, their report will show it.
Even if sales are up, rising costs can quietly erode profitability. That’s why it’s key to compare revenue and profit figures year-over-year during your company credit checks. If a business is bringing in more money but keeping less of it, it’s losing ground, and fast.
A good company credit report will spotlight that kind of trend early, before it becomes a bigger problem.
High debt levels were easy to ignore when interest rates were near zero. Not anymore. Lenders now need to check whether a company’s debt load is growing faster than its equity. A rising debt-to-equity ratio or a declining interest coverage ratio should raise eyebrows. Especially if a lot of the debt is short-term or tied to variable interest rates.
Put simply, what was manageable at 2% interest can become dangerous at 5%. And that’s exactly the kind of risk that shows up clearly in a properly analysed company credit report.
Some industries are under much more strain than others right now. Think commercial real estate or construction, where inflation and rate hikes have made a serious impact. Real estate remains one of the main industries consistently in the Company Watch Warning Area. If your borrower is operating in one of these high-risk sectors, you’ll want to weigh that carefully in your lending decision.
And don’t forget about cross-border risk. If the business has operations or revenue tied to overseas markets, make sure you run thorough international company credit checks. Geopolitical shifts, tariffs, and currency risks can all affect a borrower’s ability to repay. Even if their UK books look solid.
In the current economic climate, comprehensive company credit reports are more essential than ever. However, the risk with manually analysing data points in traditional credit reports is that you will most likely miss something critical.
Company Watch’s holistic business information solutions are designed to circumvent this problem. Our proprietary H-Score® condenses a firm’s financial health into a 0–100 score by analysing its profitability, leverage, liquidity, and more. Companies scoring 25 or below fall into a “Warning Area”. Tellingly, most corporate failures we analysed had H-Score®’s in that range before they collapsed.
Another forward-looking metric is the Probability of Distress® (PoD®), which estimates the chance of failure in the next couple of years by factoring in not just a firm’s own metrics but also macroeconomic indicators like GDP growth.
These and more tools within the Company Watch platforms act as early warning systems. If a borrower’s report comes with a very low H-Score® or a high PoD®, a lender has concrete evidence to tighten risk controls or reconsider terms.
In 2025’s high-stakes lending environment, a company credit report, read in context and enhanced by analytics, can mean the difference between a prudent loan and a problematic one.
Armed with comprehensive data from Company Watch, you can spot trouble early and make more confident decisions. In an uncertain economy, proactive, well-informed lending is the surest way to foster healthy business growth while guarding against risk.