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The Root of Britain's Weak Growth

A few weeks back the Bibby Financial Services report was revealed highlighting a number of key issues for SMEs and leading to the development of an SME manifesto for the new Government (for all the good it will do).

The report revealed that some 30 percent of SMEs want to see a reduction in business tax rates, while simplifying the PAYE system and staying in the EU were top of the agenda.

The big issue with this report and so many other surveys and polls is that they are restricted by the questions they ask, meaning they don't give an all-encompassing view of the issues businesses face.

Conduct another survey with questions that focus purely on the labour force and I'm confident you'll find that, taken on its own, many of the problems SMEs encounter revolve around an inability to attract the best talent.

When you start to look at the numerous reports together, however, something interesting happens. A pattern begins to emerge. Reductions in tax rates, better payment terms, minimising trade barriers by staying in the EU, pushing for improved banking finance to SMEs: It all boils down to one thing - money.

It makes sense. Without access to capital, all businesses, regardless of the industry they operate in, will struggle to grow and that is the issue that lies before us today, as yet another paper reports a slowdown in the country's services sector.

More from David Banfield

Britain's economy is moving along at a snail's pace because its SMEs - the powerhouse of UK employment - face a myriad number of challenges when it comes to freeing-up and accessing capital for investment in their businesses.

Why are there so many hurdles for an SME to scale when it comes to accessing capital - hurdles that are virtually non-existent for major national and multi-national companies? It’s not rocket science to see that virtually every issue, as we have stated, is reduced to a funding level. More funding equals more growth which, in turn, equals more job creation and growth in the tax base and business as a whole.

Britain places much emphasis on exports, and rightly so. If a company has an exportable product or service then there are a good number of financing options - government inspired and backed - which might swing into place to help the would-beproduct exporter.

That same company looking to expand its domestic marketplace is, however, very much on its own when it comes to financial help. It is time to recognize that SME assistance should not only be geared to one specific sector such as exporting, but that it is needed across the board.

If as we say it is not rocket science to see this simple chain of events, then why is the problem still ongoing? It seems that neither government nor the banking sector wish to engage to create a workable solution. It is therefore, once again left to the players and funding sources in the secondary market to take up the slack and become the main growth capital providers for the SME community.

The proof is in the numbers. A recent Nesta report shows that the alternative finance market - from invoice discounting to crowd funding - now provides £1.74 billion in funding to businesses across the UK.

That might not seem like a staggering amount, but when you consider that in 2012 that figure was just £267 million, the level of growth, spurred by huge demand for capital becomes apparent. From our own experience as a spot factoring service, we have seen a huge jump in the number of franchise and funding applications we receive across the UK, providing further evidence of the demand and growth opportunity in the market.

As awareness of the secondary finance market continues to rise and with no sign of the necessary support for SMEs emerging any time soon, there’s no reason why alternative finance shouldn’t hit the £4.4 billion mark Nesta is predicting for 2015.

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