British Business Bank Publishes the Small Business Finance Markets Report

The ninth Small Business Finance Markets 2022/23 Report, published by British Business Bank, highlights the role of finance in driving innovation across the UK’s small business population and in supporting  small businesses to provide solutions to achieve the UK’s net zero targets.

British Business Bank is a government-owned business development bank that aims to drive sustainable growth and prosperity across the UK, and to enable a transition to a net zero economy by ensuring finance markets work better for smaller businesses. They had celebrated distribution of 100K Loans to businesses across the UK earlier this year.

Innovation and Small Businesses

Small Business Finance Markets Report 2023 Infographic

The Small Business Finance Markets also explores the role finance has in supporting innovation. Key findings include:

  1. Despite the UK ranking 4th in the 2022 Global Innovation Index, it still has progress to make with around 43% of UK small businesses found to be innovative compared to an average 51% across the G7
  2. Economic growth requires both new-to-market and
    new-to-business innovation to flourish, and both categories use more external finance than non-innovative businesses
  3. SMEs applying for finance to innovate are most likely to seek grants,
    but other finance products are also commonly sought
  4. Lack of finance and funding can hold back companies
    from developing and commercialising innovation

The report summarises that during the Covid-19 pandemic, use of external finance by smaller businesses hit new highs, supported by Covid-19 emergency loan schemes. While this helped businesses to manage and grew during the crisis, there have been other challenges, and external finance remains an important resource for businesses as they navigate through uncertain times.

Key findings

The overall key findings from the report include:

  1. 2022 has been a challenging year for the UK’s 5.5m smaller businesses, with high energy prices and inflation. This put pressure on many small businesses’ financial positions.
  2. Lending volumes grew in 2022 with challenger and specialist banks accounting for a record share of gross lending in 2022. Use of external finance figures, however, point to increasing signs of difficulties in accessing finance.
  3. Equity finance raised by small businesses saw a turning point midway through 2022 following two years of very strong growth.
  4. Finance to support both new-to-market and new-to-business innovations are essential to delivering long-term economic growth in the UK economy.
  5. Equity flows are supporting smaller businesses to develop net zero solutions, with net-zero related deals making up an increasing share of activity. This points to more equity and debt funded investment in smaller businesses solutions.

The report also throws light on the role of inflation in various macroeconomic developments in the UK, possibility of recession, potential trends in business investments etc. Read the full report here. View the full Small Business Finance Markets report infographic.

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