The British Business Bank have published their Small Business Finance Markets 2018/19 report which assesses of finance markets for smaller businesses in the lead up to Brexit.
First, there is evidence that small businesses, due to the current period of uncertainty, are either using external finance to put in place contingency plans or reducing their finance requirements as they delay longer term investment and expansion decisions.
The second theme is declining demand for finance although, encouragingly, awareness and use of alternatives to traditional finance is rising.
- An increasing number of smaller businesses – 29%, up from 22% in 2017 – expect the UK leaving the European Union to have a negative effect on their business; a similar proportion (34%) expect it to be more difficult to access finance post-departure.
- Gross bank lending remained stable in nominal terms, with the gross lending closely matching repayments over 2018.
- Equity finance, asset finance and market-based lending have grown by 4%, 3% and 18% respectively.
- Just 36% of smaller businesses now use external finance compared to 44% in 2012 and over 7 in 10 firms say they would rather forgo growth than take on external finance.
- Awareness of alternatives to traditional finance has continued to grow, with 52% of small businesses aware of peer to peer lending, 70% aware of crowdfunding platforms and 69% aware of Venture Capital (up from 47%, 60% and 62% respectively in the previous year).
- Almost half (48%) of equity deals are in London despite it accounting for only around 20% of high growth firms, but clusters of high-growth and high-tech firms are continuing to develop across the UK.
British Business Bank