As a Business Support Partner to the British Business Bank (BBB), we eagerly anticipate their annual Small Business Finance Markets report, which continues to provide a comprehensive and independent assessment of the funding landscape for smaller businesses.
In this landmark tenth report, BBB examines how small business finance markets have evolved over the last decade (2014-2023), since the Bank published its first report in 2014. The last ten years have seen several unprecedented supply side shocks hit the UK economy and smaller businesses. Small business debt and equity finance markets have developed over the decade, with a greater number and diversity of providers and products, to better support businesses at all stages of their development. External finance remains an important resource for businesses responding to challenges and taking advantage of new market opportunities.
Of particular interest to the X-Forces Enterprise community however, are the four key issues the Bank has identified for smaller business finance markets over the next decade:
- Smaller businesses contribute a sizeable share of the UK’s Green House Gas (GHG) emissions, but face difficulties transitioning to net zero. Over the next decade, finance markets will have a critical role in funding new innovations and smaller businesses adoption of cleaner technologies, supporting smaller businesses transition to net zero. The British Business Bank will work alongside finance providers and the Government to create a modern green economy.
- Artificial intelligence (AI) has the potential to shape small business finance markets over the next decade. Finance providers are already using predictive AI but generative AI is creating new opportunities, with fintech and new entrants leading the way in its adoption. Going forward AI could help increase the availability and lower the cost of finance to smaller businesses helping to address some of the finance market challenges outlined earlier. The British Business Bank is helping to support the development of fintech and finance providers using new technologies and delivery models.
- Interest rates are unlikely to return to the ultra-low levels seen in much of the last decade. Finance markets have already begun to accommodate the new higher interest rate environment, but smaller businesses will need to adapt. This will put pressure on small business investment and survival in the short-to-medium term. The British Business Bank aims to continue to drive sustainable growth by ensuring businesses can access the right type of finance they need to start, grow and thrive. It will do this by ensuring there are a range of finance solutions available in the market to meet different business needs.
- Recent economic conditions have resulted in rising small business closures. Whilst this creates disruption in the short run, this could result in a more dynamic economy if resources are freed up to be redeployed into new productive uses. The creation and growth of new and innovative businesses will help the UK economy to become more resilient to future shocks and disruption and take advantage of new opportunities. The Bank’s Start Up Loans and early-stage equity programmes remain targeted at supporting the new start-up businesses that are vital to the UK economy.
Martin Wing, Co-CEO at X-Forces Enterprise commented on the report findings:
“Finance markets for small business investment have evolved enormously over the last ten years and this set to continue for the next decade too. XFE intends to stay connected with these advancements through our working relationship with BBB and the Start Up Loans Scheme, as well as partnering with innovative technology companies to bring services such as the XFE Business Finance Platform so we can ensure we are helping you be the best in business.”
You can read British Business Bank’s Small Business Finance Markets report in full here: https://www.british-business-bank.co.uk/research/small-business-finance-markets-report-2024/
