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Small business finance markets 2017

Small business finance markets 2017

Our latest annual Small Business Finance Markets report again highlights the crucial role that smaller businesses play in UK economic growth, and the importance of access to finance in enabling that growth. Through looking at a range of finance markets, this report provides a unique, in- depth picture of the way small businesses use and interact with finance providers and how those markets have developed. As well as informing the wider policy debate around small business access to finance, it is a key document that guides the Bank in advancing its strategy, including towards supporting the emerging Industrial Strategy.

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Greater economic uncerntainty and softening of equity markets

Since our last report, a number of significant events have taken place that have, or will, shape small business finance markets. On

a broad level, there is a greater degree of macroeconomic uncertainty, in part due to the UK’s decision to leave the European Union, and SME investment intentions remain subdued. Such uncertainty impacts on market sentiment, with equity finance, often used by firms scaling up, particularly sensitive to these changes.

Whilst equity finance remains available, late 2015 represented a peak in activity and value and deal flow has eased in the past year. The Bank will continue to monitor carefully these markets to judge whether further policy action is required.

A changing policy context

The policy context the Bank works in has also evolved in a number of important ways. The Competition and Markets Authority (CMA) published its inquiry into SME retail banking last summer, with a range of remedies proposed

to make markets work better. A central insight from that inquiry was that, on the whole, small businesses are poorly engaged with finance markets despite their importance to the health of businesses, perhaps best illustrated by the very low levels of switching between providers. A similar conclusion was reached

by a BEIS Select Committee Access to Finance inquiry that reported in October 2016 – that businesses need better information so they can engage with the market and better understand their options.

Additional information

Language

English

Pages

92

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