21 February 2019

On 11th February, the British Business Bank published its flagship annual report –  the Small Business Finance Markets report 2018/2019 – a unique, comprehensive and impartial assessment of finance markets for UK smaller businesses. The report includes trends at a regional level, which we hope will be of particular interest to you. A direct link to the report is here Small Business Finance Markets Report.

In terms of key findings in relation to the regions (see chapter 1.3 for details), there are big differences in the use of finance options between, and within, UK regions – equity deals remain concentrated in London (48% – even though only around a fifth of High Growth Businesses are in the Capital), and elsewhere, such as Manchester and Edinburgh, around tech clusters . The existence of clusters outside of London and the South East masks stark differences in equity deals numbers at sub-regional level, however – almost half (45%) of Local Authority Districts had zero equity deals in 2018. A further 24% only had one deal.

Other key findings include:

  • An increasing proportion of smaller businesses expect Brexit to have a negative impact on their business (29%, up from 22% in 2017) and over one in three (34%) expect access to finance to become more difficult following the UK’s departure from the European Union. Also, demand for external finance has continued to fall, with just 36% of smaller businesses using external finance in 2018 (versus 44% in 2012). Despite these concerns, however, half (50.4%) still aspire to grow over the next 12 months.

 

  • Stock of bank lending continues its recent decline – Bank lending stock (£166bn) was broadly unchanged from 2017 (£165bn) but this continues a decline in real terms over recent years. Gross bank lending – which makes up the biggest proportion of business finance – averaged £14.4bn per quarter. Repayments, however, were at virtually the same level – £14.3bn per quarter – meaning that net lending over the year was positive, but only by a small amount.

 

  • Demand for external finance continues its long-term decline – most smaller businesses (73% in 2018, 70% in 2017) would rather forgo growth than use external finance and just 36% of smaller businesses used external finance in 2018 (vs 44% in 2012).

 

  • Use and awareness of alternative finance is rising – use of alternatives to bank lending is continuing to grow, but at a slower pace: asset finance was up 3% in 2018 (vs up 10% in 2017) and peer-to-peer up 18% (vs up 51% in 2017). Awareness is also increasing, with 52% of smaller businesses aware of peer-to-peer lending (up from 47% in 2017) and 70% aware of crowdfunding platforms (up from 60% in 2017).

 

I hope you find this Small Business Finance Markets report interesting. Please note that the Bank regularly publishes a range of research publications focused on access to finance and related topics, all of which can be found on our website here.

 

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