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February 11, 2019updated 12 Feb 2019 10:20am

BBB: 2018 sees UK SME lending growth slow as uncertainty bites

The small business finance markets report by the British Business Bank (BBB) has shown a decline in growth of SME lending.

By Christopher Marchant

The small business finance markets report by the British Business Bank (BBB) has shown a decline in growth of SME lending with 36% of smaller businesses using external finance compared to 44% in 2012.

Over 7 in 10 firms indicated that they would rather forgo growth than take on debt through external finance.

Around 29% of SMEs, 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, with only 3% expecting it to be easier. Just over half of those smaller businesses surveyed in Q4 2018 expect to grow over the next 12 months.

Data released by the Finance and Leasing Association (FLA) last Friday showed asset finance business hit £32.57bn in 2018, a 3% rise on 2017’s figure. This is a slower rate of growth than witnessed in recent years and the 10% growth seen from 2016 to 2017. Total asset finance written in 2015 was £3.01bn, an 18% year-on-year rise.

According to the BBB report, lending through peer-to-peer platforms grew by 18% last year, compared with 51% in 2017. Awareness of alternatives to traditional finance continued to grow in the past year, 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).

Keith Morgan, chief executive officer at the British Business Bank, said: “The British Business Bank continues to implement measures stemming from 2017’s Patient Capital Review, including a new £500m Managed Funds Programme and our £2.5bn British Patient Capital initiative, and will be following up actions from our recently-published report which identified many issues around the relative underfunding of female-led businesses by the venture capital industry.”

Last October, Business Investments (BBI), the investment arm of wholesale funder British Business Bank injected £25m (€28m) of equity capital into Secure Trust Bank (STB).

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