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Funding Britain's Growth

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A lot has changed since the coalition govern- ment came to power back in 2010, but there is one issue that is still a concern for many firms across the country. It is that some British businesses, especially small and medium-sized enterprises (SMEs), are still strug - gling to access the funds they so des- perately need in order to grow from the traditional lending routes since the financial crisis struck in 2008. While there had been some prom - ising signs last year that the tradi- tional frozen lending routes had started to thaw, the latest available figures show 2015 ended on a neg- ative note. According to data from the Brit- ish Bankers' Association, net lend- ing to businesses – the amount of new loans paid out compared with the amount paid off by customers – slumped by £2.7 billion in December. While it does not break down the data by company size, similar figures from the Bank of England showed that net lending to SMEs fell by £300 million in December, after a modest rise the previous month. "The sharp fall in lending at the end of last year was a timely re - minder that accessing finance remains a major issue for busi- nesses," says Suren Thiru, UK eco- nomic adviser at the British Cham- bers of Commerce. "Young, high-growth firms in par- ticular are still facing a real strug- gle to get the finance they need to reach their full potential. More must be done to improve SME access to non-equity finance and to ensure that the British Business Bank has sufficient funding to help support some of our most promising young firms on their growth journey." The fall in net lending at the end of last year came despite the in - troduction of the Bank of England and Treasury's Funding for Lend - ing Scheme (FLS) in 2012, which was originally de- signed to encour- age banks and building societies to boost their lend- ing to both house- holds and busi- nesses. At the end of 2013, it was altered to focus mainly on business lending after borrowing by households recov - ered much more quickly than had been expected by policymakers. Further altera - tions were made to the flagship lend- ing scheme to in- clude asset-based lenders and most recently chancel- lor George Osborne announced in the Autumn Statement that the scheme would be extended for another two years. "Now that credit conditions for households and large businesses have improved, it is right that we fo - cus the scheme's firepower on small businesses, which are the lifeblood of our economy," Mr Osborne said. The FLS extension was an- nounced alongside a package of measures to help boost lending to SMEs, including guaranteeing up to £500 million of bank lending to these firms, which the government is no doubt hoping will kick-start a fresh wave of cor - porate borrowing in 2016. But while every- one waits for bank lending to busi- nesses to get back on track this year, the ever-growing army of alternative funders, includ - ing crowdfund- ing, peer-to-peer lending and pen- sion-led funding among others, is gathering pace and is set to expand further in 2016. For example, Funding Circle, the peer-to-peer lender, which was set up by three Oxford Univer - sity graduates to capitalise on the high street banks' failure to lend to SMEs, recently re - ported that it passed the £1-billion lending milestone. According to Samir Desai, its chief executive, more than half of this was lent in 2015 and investors are on track to lend a further £1 billion over the next 12 months, as marketplace lending proves to be the preferred option for small busi - nesses looking to access finance. Apart from whether funds are available from banks and alterna- tive lenders, there are also several factors at play this year, which will impact SMEs' decision to borrow money in the first place as well as choosing what to do with it. The first is the prospect of policy - makers at the Bank of England vot- ing to lift interest rates from the re- cord low of 0.5 per cent, where they have stood still since the depths of the downturn in 2009. While there has been a succession of mixed signals on the timing of the first increase from the Bank of England, the latest steer from gov - ernor Mark Carney is that Britain is not ready for one. As a result of comments by Mr Car- ney and some of his fellow dovish colleagues on the Monetary Policy Committee, analysts are predicting that a small rise would come at the end of 2016, while others believe that 2017 is much more likely. Other factors at play, according to recent research from the Feder - ation of Small Businesses, include the rollout of pension auto-enrol- ment and the new national living wage. Its members are also deeply worried about proposed mandatory quarterly tax reporting, which in its current form will add to the admin - istrative burden of small firms and the self-employed. 2016 will cer tainly be an inter- esting year. DISTRIBUTED IN KATHRYN HOPKINS Former property and economics correspondent at The Times, she was a spokeswoman at HM Treasury and economics reporter on The Guardian. JAMES HURLEY Enterprise editor at The Times and award-winning journalist, he was formerly enterprise editor with the Telegraph Media Group. DAN MATTHEWS Journalist and author of The New Rules of Business, he writes for newspapers, magazines and websites on a range of issues. CHARLES ORTON-JONES Award-winning journalist, he was editor-at-large of LondonlovesBusiness.com and editor of EuroBusiness. SAM SHAW Freelance writer and editor, she covers a range of topics including business, finance, technology and travel. JOHN STEPEK Editor of MoneyWeek and its daily e-mail Money Morning, he was formally a finance writer for Teletext. CATHERINE WHEATLEY Business journalist specialising in startups and fast-growing companies, she contributes to newspapers including The Sunday Times. RACONTEUR PUBLISHING MANAGER Phillipus Putter DIGITAL CONTENT MANAGER Sarah Allidina HEAD OF PRODUCTION Natalia Rosek DESIGN Samuele Motta Grant Chapman Kellie Jerrard PRODUCTION EDITOR Benjamin Chiou MANAGING EDITOR Peter Archer BUSINESS CULTURE FINANCE HE ALTHCARE LIFEST YLE SUSTAINABILIT Y TECHNOLOGY INFOGRAPHICS raconteur.net/funding-britains-growth-2016 CONTRIBUTORS Although this publication is funded through advertising and sponsorship, all editorial is without bias and sponsored features are clearly labelled. For an upcoming schedule, partnership in- quiries or feedback, please call +44 (0)20 3428 5230 or e-mail info@raconteur.net Raconteur is a leading publisher of special-interest content and research. Its publications and articles cover a wide range of topics, including business, finance, sustainability, health- care, lifestyle and technology. Raconteur special reports are published exclusively in The Times and The Sunday Times as well as online at raconteur.net The information contained in this publication has been ob- tained from sources the Proprietors believe to be correct. However, no legal liability can be accepted for any errors. No part of this publication may be reproduced without the prior consent of the Publisher. © Raconteur Media Smaller firms still struggling for cash As the world economy flirts with an ugly slowdown, go-ahead British firms are eager to finance growth and buck the global economic trend OVERVIEW KATHRYN HOPKINS Share this article online via Raconteur.net Alamy Source: BDRC Continental £2.7bn reduction in net borrowing by UK companies in December 2015 36% of UK SMEs were using external f inance as of November 2015, equal to 1.6 million Source: British Bankers' A ssociation Camden Town Brewery raised £2.75 million via Crowdcube in 2015, before being sold to AB InBev for a reported £85 million RACONTEUR raconteur.net 03 FUNDING BRITAIN'S GROWTH 18 / 02 / 2016 FUNDING BRITAIN'S GROWTH

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