Scale Up to Level Up - PKF Francis Clark
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Scale Up to Level Up

Last week (7 September), the All-Party Parliamentary Group (APPG) on Fair Business Banking issued a report, “Scale up to level up: Reforming SME Finance”.

The report

Key points in the report found here:

Issues:
  • The provision of SME finance in the UK is hugely concentrated and largely shared amongst the Big 4 banks
  • As a result of the consolidation of UK banks over many decades, this has led to a critical shortage of finance to many SMEs, also a lack of trust between banks and businesses which has significantly reduced the borrowing appetite amongst SMEs
  • A significant proportion (73%) of SMEs would rather grow more slowly than borrow
Proposed solutions, include:
  • Removing regulatory and competition barriers for challenger banks, mutuals and Community Development Finance Institutions,
  • Providing pump-prime funding from big banks and dormant assets
  • Giving non-bank lenders access to cheap money to lend from the Bank of England’s Term Funding Scheme for SMEs
  • Rolling out Legal Entity Identifiers to make it easier for big banks to lend to small businesses,
  • Better signposting
  • A new approach to equity finance through a 3i 2.0 and regional angel programmes

(There are other recommendations set out on pages 23 to 27 – well worth a read)

The funding gap referred to is not a new phenomenon – it has been the subject of/conclusion of various reports in the past; some of which I have blogged on over the years. These reports include the one that I associate with the origination of the British Business Bank – the Breedon Report back in 2012.

There are some interesting international comparisons contained in this report and as indicated above some recommendations put forward – a number of which I know are currently projects of the aforementioned British Business Bank and/or have a regional focus (see further below). I also noted that a continuing role for LEP/LEP Growth Hubs is advocated.

It was also pleasing (for me) to see CDFI’s get a mention and specifically the one I am most familiar with, SWIG Finance – I have known and worked with SWIG Finance for in excess of a decade now.

The feedback loop

One of the points raised which I found particularly interesting and one where I think there may be a role for my colleagues and I to play is under the heading, “Unnavigable finance landscape…”  which goes on to say, “Customers appear to have a limited understanding of the differences between available products which has clear consequences for the customer experience and ability to utilise the best finance option for their needs. Furthermore, this lack of shopping around leads to a lack of demand side pressure against incumbent providers, creating a feedback loop which reduces the competitiveness of the supply of finance to SMEs.”

PKF Francis Clark

Looking forward to 2022, we are looking to bring together different providers of funding in one event for owner managers of SMEs to hear from in one concentrated session – to share an overview of the differences between available products and sources of the products.

In the interim, we will look to put together a series of webinars on reginal funding which will hopefully give Owner Managers an insight into the funding eco system in their geographic areas and any planned initiatives to address the perceived funding gap.

Anyone wishing to chat through any of the above, contact me or your usual point of contact at PKF Francis Clark.

FEATURING: Richard Wadman
Richard qualified as a Chartered Accountant with KPMG in 1993. Since 2006 he has worked in Corporate Finance, firstly with the predecessor firm in Truro… read more
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