British Business Bank, a state-owned economic development bank established by the UK Government, increased support for start-ups and smaller businesses by over a quarter in the past year, providing over 89,000 businesses in the UK with £6.6bn of finance. This is an increase of 27%, compared to the previous year, according to its recently published annual report.
The British Business Bank continue to help drive economic growth by making finance markets work better for smaller businesses, wherever they are in the UK and wherever they are on their business journey, enabling them to prosper and grow.
Outlined in the report the Bank had six key objectives for 2018/19:
Increase the supply of finance
By helping to make markets work better, enabling smaller businesses to secure finance that they otherwise wouldn’t get, the Bank enables investment that benefits the entire UK economy. In order to increase supply, the Bank has built up a wide range of delivery partners who can get that finance to the market. Over the past year they have made new commitments of £957m.
Help to create a more diverse finance market
As well as boosting the supply of finance to smaller businesses, it’s equally important to spread that supply across a range of products, providers and funding sources. This diversity can improve access to finance for a wider range of businesses, improve the terms and ease of use of finance for small businesses and increase the likelihood that firms get the most appropriate form of finance for their needs. In 2018/19, the Bank committed capital to 14 new funds across their venture capital and growth capital programmes, including to new and existing delivery partners. The Bank now works with over 130 finance providers.
Identify and help to reduce regional imbalances in access to finance
There continues to be a regional imbalance, particularly in the availability of equity and higher risk debt investment. This is heightened by a lack of awareness and confidence among smaller businesses seeking finance, especially those outside London and the South East. Therefore businesses in these regions often miss out on growth opportunities. One of the Banks regional investment funds is the Midlands Engine Investment Fund. Launched in June 2018, the fund is supported by the European Regional Development Fund and provides commercially focussed finance through Small Business Loans, Debt Finance, Proof of concept and Equity Finance funds. It aims to transform the finance landscape for smaller businesses in the Midlands and to realise the region’s potential to achieve economic growth through enterprise. In its first year, the £250m Midlands Engine Investment Fund (MEIF) invested £41m through debt and equity funds of which £17m came from the private sector. The Bank has held more than 800 meetings with smaller businesses, presented at over 50 external events and attended 150 more as part of their UK Network programme. They will use the information and insight gained from these meetings to inform the Bank’s on-going regional strategy.
Encourage and enable SMEs to seek the finance best suited to their needs
Seeking and finding the right finance, at the right time, can enable businesses to diversify, expand or enter new markets, meaning they are more likely to achieve their full growth potential.
The Bank has a four-stage process aimed at driving demand for finance amongst UK smaller businesses:
- Awareness – the Bank is building an awareness of themselves as a provider of trusted information on finance options
- Consideration – to become the information provider of choice for UK smaller businesses
- Usage – the Bank ensures the content provided is easy to find and understand
- Outcomes – seeing changes in how smaller businesses seek and use finance.
Be the centre of expertise on smaller business finance in the UK
Being the centre of expertise on smaller business finance gives the Bank knowledge and credibility to achieve other objectives, allowing them to work alongside key Government, industry, academia, thinktank and media stakeholders to shape and inform access to finance debates. The Bank’s closeness to smaller business finance markets makes it uniquely placed to advise Government on their workings. The Bank’s activities were discussed more than 170 times in Parliament in 2018/19, with key themes including Start Up Loans, European funding of UK smaller businesses, digital and technology, and the rural economy.
Manage taxpayers’ money efficiently
When programmes are managed efficiently, the Bank can deliver value for money. All UK taxpayers benefit from their ability to deliver the most positive outcome with the least amount of Government resources.
- 3.6% adjusted return on capital for the year
- A cumulative excess return of £195m
- Net operating income of £42.4m for 2018/19
- £81.3m profit before tax
In 2018/19, the British Business Bank has grown rapidly, both in scope and delivery. The depth of that delivery – from the Start Up Loans programme providing £500m of loans since 2012, to patient capital programmes to help ambitious high-growth companies become the world-class businesses of tomorrow.
Lord Smith of Kelvin, chairman of the British Business Bank, said: “Smaller businesses are of huge importance to the UK economy, and this report shows the British Business Bank is playing a crucial part in their growth and success.”