Every successful business, no matter how innovative or fast-growing, ultimately depends on one simple measure: solvency. A solvent business is one that owns more than it owes, with sufficient assets to cover its debts and the means to continue trading. It is not just an accounting concept, but a signal of underlying financial health and resilience.

Solvency shows that a business can meet its obligations, even during difficult trading periods. When liabilities are kept under control and supported by tangible or liquid assets, a company is less vulnerable to cash flow shocks, rising interest rates or late payments from customers. It provides confidence to suppliers, lenders and investors that the firm is being managed prudently and that short-term fluctuations will not lead to crisis.

Maintaining solvency also provides flexibility. A business that operates with positive net assets can reinvest in growth, negotiate better borrowing terms and respond quickly to new opportunities. In contrast, firms that operate on the edge of insolvency often spend much of their time managing creditors, juggling payments or seeking emergency funding, which can distract from long-term strategy.

There are wider benefits too. Solvent companies tend to attract better staff and more loyal customers, as both groups are reassured by signs of stability. Regulators, insurers and trade bodies all view solvency as a key indicator of sound governance and reliability. For owner-managed firms, it can also make a significant difference when planning for succession, exit or sale, as buyers and investors typically value strong balance sheets and minimal debt exposure.

Regular financial reviews, realistic cash flow forecasts and disciplined control of borrowing are all essential to sustaining solvency. While profit is the measure most often discussed, solvency is the foundation that supports it. A business may trade at a loss for a short period and recover, but once it becomes insolvent, the options narrow rapidly. In uncertain economic conditions, staying solvent remains the clearest mark of real business strength.

The UK continues to struggle with low productivity growth, a long-running challenge that shows little sign of improvement. In the three months to June 2025, output per hour worked was around 1.5% above its pre-pandemic level, but it actually fell by almost 1% compared with the same period a year earlier. The previous quarter had seen only a marginal rise and overall, the trend is one of stagnation rather than sustained growth.

Although the figures appear slightly better than before the pandemic, they underline a deeper problem. Productivity growth has been flat for much of the past fifteen years, averaging only around 0.5% per year since the financial crisis, compared with about 2% annually in the decades before 2008. This persistent weakness limits the economy’s ability to generate higher living standards, boost wages and support stronger public finances.

What lies behind the figures

Several factors contribute to the poor results. A shift in activity towards lower-productivity industries has diluted national performance, as sectors such as retail, hospitality and parts of the public sector expanded while more productive sectors grew more slowly. The public sector itself has seen a notable rise in hours worked, particularly in health and social care, without a matching increase in measured output.

Regional disparities also continue to weigh on national averages. London and the South East maintain far higher productivity levels than many other parts of the country, particularly regions with weaker transport links and lower investment. Capital investment remains subdued overall, and many businesses have been slow to adopt new technology or digital systems that could raise efficiency.

The bigger picture

For all the political focus on growth, the UK remains trapped in what economists often call a productivity puzzle. The country is producing more than before the pandemic, but only slightly and progress is fragile. Without stronger investment, skills development and incentives to innovate, productivity gains are likely to remain modest, constraining both wage growth and the government’s ability to fund improvements in public services.