In the UK, just like in many parts of the world, small and medium-sized enterprises (SMEs) are the main drivers of job and wealth creation, as well as economic growth. Statistics from the Federation of Self-Employed and Small Businesses (FSB) show that small businesses represented 99.3% of all businesses in the UK’s private sector at the beginning of 2015, of which 99.9% were SMEs. It also showed that SMEs generated 15.6 million jobs (60% of employment in UK’s private sector), and the annual revenues generated by SMEs was £1.8 trillion (47% of UK’s total private sector turnover).
Lack of an environment that promotes innovative startup companies and entrepreneurs risks the potential destruction of the whole economy. Policy initiatives, such as reducing regulations and providing incentives for investments made in smaller firms, can boost economic growth.
The UK GDP increased by 0.5% in Q4 of 2015, and the annual growth rate was 2.2%. This number is not bad if compared with the economy in other developed countries. Predictions are that the growth rate will remain steady in 2016.
The British Business Bank (BBB) aims at improving capital access for SMEs. The agency has partnered with over 80 finance companies to achieve this mission. According to BBB, increasing the number of companies that can scale up will have great impact on productivity, job creation and economic growth. For this reason, it is important to create a cohesive and supportive system that will foster the growth of SMEs.
BBB is planning to increase its efforts in providing financial solutions for SMEs in the UK. This will help the small businesses to scale and grow. Even though it grew by 75% in 2015, the alternative finance sector remains at just 3% of gross lending. Out of about £2.8 billion that was raised through online portals, P2P lenders accounted for about £1.3 billion.
BBB also noted that the UK has the biggest online marketplace for financing among European countries. Yet even though this financing channel is relatively new, it has the potential for rapid growth across Europe.