Scale Up to Level Up – Reforming SME Finance

99% of the UK’s businesses are small and medium sized enterprises (SMEs), yet these businesses face considerable barriers in accessing credit, resulting in a huge £22 billion funding gap. The current financial system’s high degree of concentration, centralisation and lack of relationship-based banking leads to poor customer satisfaction and limited support from banks, difficulty navigating the finance options and applications process, and pessimism and a lack of trust towards financial institutions. This is not just the problem of SMEs; these barriers hamper business’ ability to scale up, efforts to address regional equality and the UK’s economic resilience to economic downturns and other crises.

In this report for the APPG on Fair Business Banking, we outline the current state of play of SME access to finance, the impact of this on SMEs and the knock-on impacts on the UK economy as a whole, looking to existing models in the UK and examples from other countries which could fill the gap left by the current oligopoly. We then set out a suite of policy recommendations to strengthen SME access to a more diverse range of finance models and support levelling up in the UK.

Read the report here.

Published September 2021