British Business Bank small business finance markets report for 2018-19 published

Richard Harrington MP, the minister for business and industry, addressed delegates this morning at the launch of the British Business Bank’s small business finance markets report for 2018-19.

The minister talked about his own experience in business, and questioned why so few people in the UK are inspired to entrepreneurship. He expressed his aspiration that entrepreneurialism in the UK would be perceived on an equal basis as qualifying as a professional — and that more businesses would be ‘passed on’ through the generations, as happens in the United States.

Mr Harrington also lamented the impact of uncertainty surrounding the UK’s withdrawal from the European Union, which has had an impact on small businesses’ demand for finance. There has been a long-term decline amongst small businesses in the UK for external finance, and nearly three-quarters of firms prefer to grow more slowly to avoid borrowing.

There is a strong correlation between firm turnover and equity finance: higher turnover firms tend to make greater use of equity investment — which is catching up slowly with levels common in the United States. However, there is a strong association between UK equity ‘clusters’ and the leading universities: indeed, in around half of local authority areas there were no equity deals at all, and in a further quarter there was just one. Addressing the challenge of regional imbalances is one of the main themes for the British Business Bank identified in this report.

As in previous years, most of the growth in small business finance markets has been driven by the non-bank sector. Total marketplace lending in 2018 exceeded £6.2 billion (according to the report), and grew by 21 per cent during the course of the year (with more than £20 billion lent since 2011). The most significant growth within the marketplace lending sector was driven by invoice finance (which is reported to be up 105 per cent on the preceding year).

 

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