Up to £15 billion could be unlocked under a UK market for private placed debt, according to the CBI. The Confederation of British Industry is urging the next government to ‘mind the gap’ in the financial services sector’s ability to help unleash new long-term growth capital to support dynamic medium-sized businesses.
The UK has rebalanced away from traditional bank debt because of balance sheet restructuring and regulatory change following the financial crisis. Despite an increase in short-term alternative finance, the lack of long-term growth capital and difficulties in accessing trade finance are impacting SME’s ability to grow. In addition, the shortage of capital investment in infrastructure is holding back growth in the wider economy, stresses the CBI.
To boost the availability of long-term growth capital, a new CBI report, Financing our Future Economy, calls on the next government to promote a market for privately placed debt, which the Breedon Review estimates could unlock up to £15 billion.
Stuart Lunn, CEO of LendingCrowd enthused: “We welcome the CBI’s report into accessing finance for SMEs. The alternative finance sector, which includes peer-to-business crowdfunding and crowdlending, has a massive potential to help fill this gap.”
The report also highlights that most of the £466 billion investment needed by 2020 to keep UK infrastructure up-to-date needs to come from the private sector. But the CBI warns that investors are being held back by uncertainty over the future pipeline of projects. It’s time for the government to establish an independent infrastructure body to determine future investment needs and look at innovative solutions, like ‘bundling’ smaller projects together, to create an attractive proposition for institutional investors.
John Cridland, CBI Director-General, said: “The UK is still missing a trick on long-term growth capital. The next government needs to mind this financial gap otherwise our medium-sized firms – the job creating dynamos of the economy – will suffer. In the same way that the profile of alternative finance has increased, we want to see politicians getting behind a UK market for privately placed debt and backing the use of equity finance, to stimulate investment and long-term business growth. “If firms can’t get the trade finance they need to explore new markets, the UK has no way of meeting its ambitious exports target of £1 trillion by 2020.”