Targeting advice, information and direct support for high growth small businesses with the potential to grow and scale-up, and improving access to finance for small and medium sized businesses (SMEs) outside London and the South East of England are both test and opportunities for the Government, the Business Energy and Industrial Strategy (BEIS) Committee says in its report on Access to finance.
The access to finance report highlights comments by the Prime Minister about her desire for opportunity and economic success to be more fairly distributed across the UK. The BEIS Committee says that addressing regional disparities in access to finance to enable entrepreneurs to start and grow their own business can have an important role in rebalancing economic growth across the country.
Problems around access to finance are not only geographical, but also exist for companies at different stages of growth. The Committee heard evidence of a particular problem of SMEs struggling to secure £10-£25million funding to scale-up. The report says the Government must identify the strengths and weaknesses of the entire finance ecosystem and target intervention where problems, such as in providing the resources for high growth small businesses wishing to scale-up, are found. Such targeted intervention will be a major test of the Government’s industrial strategy.
The Committee also calls for Government action to improve access to information and advice on the finance options available to SMEs, which can be a more significant barrier to gaining the necessary capital then the availability of funding itself.
The report also recommends Ministers identify the size of the current European Investment Bank contribution to the UK economy and make a clear statement on plans to ensure that the level of funding will not be reduced following the result of the referendum on the UK’s membership of the European Union.
Iain Wright MP, Chair of the Business, Energy and Industrial Strategy Committee, said:
“Our inquiry showed that access to finance is not as fundamental a barrier to business growth as it was a couple of years ago. Such initiatives, like the Enterprise Investment Scheme and the British Business Bank have been warmly applauded by business, and we recommend that the Government continues with these successful interventions.
However, serious problems remain. If the Prime Minister is serious about building an economy that benefits the UK as a whole, then improving access to finance for businesses outside London and the South East will go a long way to achieving this. The willingness of the Government to intervene in this clear market failure represents a test and opportunity in the context of its next industrial strategy.
The Government must also make sure funding is available not just for entrepreneurs wishing to start their own business but also for established high growth small businesses with the potential to scale-up, for example by opening a new warehouse, purchasing new capital equipment to make them more productive and profitable or entering the export market.
The Government needs to take overall responsibility for identifying weaknesses in the ecosystem and use targeted interventions, as well as encouraging and incentivising lending and investment in this specific part of the ecosystem, including from sources such as pension funds, cash rich corporations, challenger banks and venture capital bodies.
But these efforts will only work if businesses know about these options and now to access them. Our inquiry found that access to such information and advice was often more of a barrier to an SME gaining the finance they needed than the availability of the funding itself. This is unacceptable and the Government address this as a priority.”