BRITISH BUSINESS BANK – SMALL BUSINESS FINANCE MARKETS UPDATE 2018/19

15th February, 2019

By Andrew James

Overview

The British Business Bank is a 100% government owned, but independently managed organisation that ‘improves finance markets so they more effectively serve the needs of smaller UK businesses.

Following on from our blogwhich gave some background on The British Business Bank, we have their latest ‘Small Business Finance Markets 2018/19 report, which not surprisingly has a focus on Brexit.

Uncertainty surrounding Brexit – access to finance for SMEs is key

Due to the relatively weak macroeconomic outlook due to Brexit, the report states that it is more important than ever to ensure finance to Small and Medium sized Enterprises (SMEs) is available.   

The report states that despite the uncertainty surrounding Brexit, ‘flows of finance to SMEs have remained strong throughout 2018 (matched or exceeded those in 2017)’. However, according to the latest SME Finance Monitor data ‘the number of SMEs seeking new finance has weakened further, with applications at a record low’.

Growth and external finance

The report highlights that a significant number of businesses expect to grow in 2019 despite the uncertainty around Brexit, and a reluctance to seek external finance.

On the latter point, a greater understanding of the potential benefits to SMEs of seeking finance is required to break the current attitude towards it, according to the British Business Bank. 

For example the report states:

“Demand for external finance continues its long-term decline, with just 36% of smaller businesses now using external finance compared to 44% in 2012. Data also suggests applications for new loans and overdrafts are continuing to fall. Of most concern for the economic outlook, over 7 in 10 firms say they would rather forgo growth than take on external finance.”

and

“Many small businesses that have undergone a period of high growth in recent years have achieved that growth without using equity finance. However the faster the rate of growth achieved, the more likely it is that they made use of equity finance”.

Demand Development Unit and Finance Hub

The report commends the creation of a Demand Development Unit and the Finance Hub  set up to provide users with independent and impartial information on debt and equity finance plans. The report states that the Finance Hub has proven crucial to those SMEs who have been unable to access conventional finance from their bank, and has offered a referral platform to other providers that may be able to offer a solution.

Cornwall & Isles of Scilly Investment Fund and other regional initiatives

Of particular interest to the people I share an office with is the Cornwall & Isles of Scilly Investment Fund (CIOSIF). CIOSIF is one of three regional funds provided by the British Business Bank in order to provide both debt and equity finance to businesses at a local level. More details on my colleague’s blog.

The launch of the regional funds has come at a time where the “UK wide picture on small business finance markets masks examples of notable success in some local areas, but considerable challenges in many parts of the UK”.

As part of the effort to address the above, the British Business Bank is establishing “The £100m Regional Angels Programme to help reduce regional imbalances in access to early stage equity finance for smaller businesses across the UK” – more news on that to follow in due course when successful Applicant(s) for delivery partners in the South West and South are in place.

Finance in events 2019

We have lined up participation from the British Business Bank at our Finance in Cornwall 2019 event and hope to replicate this at Finance in the South West and Finance in the South events later this year.

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