Corporate debt protection: the forgotten cover for businesses as £223 billion of SME debt sits unprotected

15 Jul 2013

  •  Joint Legal & General / ‘Every Business Matters’ campaign reveals the average SME holds £144,980 in corporate debt
  • Yet, over half (51%) of businesses do not have any corporate debt cover in place to protect against a business owner dying or becoming critically ill
  • Over half (51%) of SMEs expect their borrowing to stay the same or even increase over the next 12 months
  • Credit cards are now one of the main forms of debt for a fifth (20%) of businesses
  • Follow the campaign using #everybizmatters

£223 billion worth of corporate debt currently sits unprotected within SMEs across the UK[1], reveals research commissioned by Legal & General leaving UK businesses exposed to serious levels of financial and commercial risk.

According to the study, over half (51%) of businesses have some form of corporate debt averaging £144,980[2].  More than a third (36%) of these small businesses rely on personal guarantees from their business owners to obtain the bank loans, overdrafts and other corporate debt, which are essential to keep cash flowing in their businesses; yet over half (51%) have no cover in place to repay this debt in the event of the business owner dying or becoming terminally or critically ill.

Further to this, over half (51%) of small business owners expect their borrowing to either stay the same or increase over the next 12 months.  With £223 billion of debt currently not covered by insurance, this paints a potentially stark picture for UK businesses. 

Bank overdrafts are the most common form of corporate debt, held by over a fifth (21%) of UK businesses questioned. However in limited companies, the highest debt was through director loan accounts (30%), and a quarter (25%) aren’t aware that these need to be repaid on death. 

There has also been a significant rise in the use of alternative sources of debt, in particular overdrafts and credit cards.  The findings showed that the number of UK businesses taking on credit card debt has increased from 3% in 2011 to 20% in 2013, while businesses using overdrafts have increased from 18% to 21%. Meanwhile, the number of businesses taking on bank based loans has reduced from 30% in 2011 to the current 16%.

The research also homed in on advice, asking business owners who have bank debt whether their bank had recommended they take out life cover.  Almost two thirds (64%) of businesses said life cover was never mentioned by their bank, while a further 14% said it was mentioned but they were never referred to an adviser.

Clare Harrop, Head of Specialist Protection at Legal & General says: “Taking on corporate debt is an inescapable reality for most businesses owners looking to sustain and grow their businesses, and it’s certainly interesting to see a rise in alternative forms of debt such as overdrafts and credit cards.

“Corporate debt protection cover is essential for any business with debt, to ensure the business is safeguarded against the financial risks associated with death or critical illness of a business owner and not left with a serious debt to settle.  Basic protection could save a business, not to mention to a business owner’s personal wealth.”

Karen Barrett, Chief Executive at added: “It’s alarming just how little awareness there is around the financial impact of not having the right protection in place to cover the corporate debt which many SMEs need just to keep the wheels turning.  Business owners are putting themselves in an incredibly vulnerable financial position by disregarding this cover.  Our ‘Every Business Matters’ campaign[3] is designed to raise awareness of the growing business protection gap in the UK, and to communicate the importance of protection to both business owners and the business protection market.”

To find out more about the ‘Every Business Matters’ campaign go to: or follow the campaign using #everybizmatters

To find a local professional adviser go to:

Legal & General’s business protection adviser site: 


 Notes to editors

[1] The current UK corporate debt gap stands at over £223 billion (£223,604,063,103).  Figures are based on the average amount of corporate debt, multiplied by the number of different types of businesses in the UK (sole trader, limited companies and partnerships), and then multiplied by the % of those not protected. 

[2] UK businesses had an average of £144,980 corporate debt against them in 2013. This average is taken from all responses that have confirmed they have some form of debt.

Average per business type:

  • Sole traders: £59,773
  • Limited companies: £157,978
  • Partnerships: £198,148

These average figures are based on the total amount of corporate debt divided by the number of respondents who stated they had such debt.

[3] ‘Every Business Matters’ is a joint campaign by Legal & General and, which aims to raise awareness about the UK’s business protection gap and highlight the importance of having adequate protection in place.  Conducted between November 2012 and February 2013 amongst 500 respondents, the research analysed the assets, shares and profits of businesses, as well as the attitude of business owners.  This research has been commissioned by Legal & General and should be quoted as their research.

For more information contact:


Anna Schirmer/ Emily Falla/ Kate Aitchison, Lansons Communications: 020 7294 3682

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About Legal & General

Alyson Bowcott, PR Manager

Legal & General Group Plc

01737 374443/ 07764 582574

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The Legal & General Group, established in 1836, is one of the UK’s leading financial services companies.  As of 31 December 2012, we were responsible for investing £413 billion worldwide on behalf of investors, policyholders and shareholders.  We also had over seven million customers in the UK for our life assurance, pensions, investments and general insurance plans.

Legal & General is one of the biggest providers of index-tracking investments in the UK, managing £243 billion as at 31 December 2012.

Legal & General Assurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

The information contained in this press release is intended solely for journalists and should not be relied upon by private investors or any other persons to make financial decisions.

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