Small UK businesses could lose future financial opportunities and support as a result of the EU referendum result, according to business lender Funding Circle.
£100 million secured for British businesses
On 20 June, prior to the EU referendum, the European Investment Bank (EIB) confirmed that it would provide £100 million to support small British businesses, working with UK-based lender Funding Circle. Funding Circle provides loans of roughly £50,000 to businesses sized on average 30 people or less.
This initial £100 million was intended to be the starting point for a wider multi-billion pound programme to provide UK businesses with funds.
“It’s very unlikely to happen now”
But while the £100 million funding is secured, future funding from EIB is now in jeopardy. Following the majority Leave result on 24 June, co-founder at Funding Circle James Meekings told the Business, Innovation and Skills (BIS) Committee – which assesses spending by governmental department BIS – that this programme is now “at risk”.
“The deal with the EIB was a start to create a multi-billion pound programme for getting more funds into UK business,” Meekings says. “The programme is at risk. If I’m honest, it’s very unlikely to happen now.”
According to Meekings, loans to Small and Medium-Sized Enterprises (SMEs) employ roughly 60% of people across the country.
The majority of design consultancy businesses fall under the SME category – small businesses are defined by Europa as those with a staff count of maximum 50, and a turnover of maximum €10 million (£8.4 million), while a medium-sized business is one with maximum 250 staff, and a turnover of maximum €50 million (£42 million).
Too soon to speculate
In a statement, the EIB says it is yet to come to any decisions about its ties with the UK.
It says: “At present, the EIB’s shareholders have not requested the Bank to change its approach to operations in the UK.
“It is premature to speculate on the impact of the referendum result on the EIB, including the Bank’s future relationship with the UK Government and its future engagement to support long-term investment in the UK without clarity on the timing, circumstances and conditions of a withdrawal settlement.”
Government backing necessary
Meekings adds that with doubts around future funding from Europe, UK-based banks like the British Business Bank will need to be utilised, and the UK Government should be “putting more money in” to help SMEs.
“To date, we have had £60 million from the British Business Bank,” he says. “During this time of uncertainty, the British Government should be backing small businesses.”
“Our question is – what are the programmes that the Government could put in place given this new world of uncertainty to help get public funds and encourage growth and money directly into small businesses?” he says.
Businesses need “certainty”
Marcus Stuttard, head of AIM, the London Stock Exchange’s international market in place to help small companies grow, told the BIS Committee that the business community is looking for “certainty” so that they can “plan”.
“We would expect that companies will delay making investment decisions and therefore requesting finance as well,” he says. “The greatest thing we can all do is remain collaborative and provide as much certainty as quickly as possible.”
Samir Desai, chief executive officer at Funding Circle, says in a statement that investors are unlikely to be affected in the “short term”.
“Many of our UK small businesses do not trade with the European Union and are unlikely to be immediately affected,” says Desai. “We have conducted rigorous stress tests on our loanbook which show that even in the most stressed conditions, investors will continue to earn positive returns.”
“The value design brings to the economy is undeniable”
Deborah Dawton, chief executive officer at the Design Business Association, says following the referendum vote that UK design is “world leading”, “still a potent business asset” and a “sound commercial investment”.
According to the UK Government, between 2013 and 2014 the creative industries’ value to the economy grew at almost double the rate of other UK industries, with design – including product, graphic and fashion – increasing the most at 16.6%. It also states the value of the creative industries was £84 billion in 2014 and accounted for 5% of the UK economy.
“The value design brings to the economy is undeniable,” says Dawton. “It is fundamentally important that this continues to be recognised.”
Creative Industries Federation to host post-referendum events
Creative Industries Federation (CIF) adds that while access to regional and sector-specific funding is a key concern for those working in the industry following Brexit, as is access to markets, IP protection and freedom of movement of talent.
In reaction to the vote, the organisation has announced it will be holding a series of “practical” events around the UK which will aim to “bring the sector together”, “marshal opinions” and “come to decisions” about the future.
The first meeting takes place in London on 7 July. A venue is yet to be announced.