UK technology, media and telecoms (TMT) firms are facing an uphill struggle to find funding as investment banks and private equity houses scale back exposure, research has found.

Figures from auditor BDO Stoy Hayward finds just 38 per cent of TMT businesses claim new funding is easily accessible, compared to 73 per cent a year ago. Three in ten claim finding access to funding is difficult, more than double the 14 per cent that said they encountered this problem last year.

A large number of respondents have scaled back their capital raising ambitions accordingly, with 55 per cent not looking to raise cash externally. This is more than treble 2008's figure of 17 per cent.

A year ago, about three fifths of TMT companies were looking to private equity firms, investment banks and the capital markets for finance. This has now plummeted to a mere 14 per cent, while those seeking straightforward bank loans has risen from 9 to 17 per cent.

Julian Frost, BDO's head of TMT, claimed pressure from financiers was putting many ambitious businesses in a Catch-22 situation. "We are hearing increasing levels of frustration being expressed by TMT businesses as financiers say to them ‘meet your growth forecasts and we will support you with additional finance’," he said.

"These dynamic, innovative businesses need the additional capital to meet their growth forecasts. All this is just creating a chicken and egg situation.”

Frost foresaw an uncertain future for many TMT firms and warned that failure to support them could damage the UK tech industry. “As the economic environment remains tough over the coming months, the situation is likely to become increasingly difficult and many businesses may feel that funding has dried up completely," he said

“These results are clearly a reflection of the difficult environment that TMT businesses are experiencing and suggests that companies are having to scale back their long term plans in view of the current economic situation. If this continues, there is a real risk that investment in research and development, the lifeblood of many TMT businesses, will dry up, stalling UK innovation."