Midlands needs to be careful of the funding gap
By Dr Steve Walker, chief executive of ART Business Loans
“MIND the Gap” is a phrase associated by many with a trip to the capital and tube journeys.
For those working, as I do, in access to finance for businesses “Mind the Gap” has a different meaning. We are concerned with a gap left in the market for finance provision, which results in many viable businesses being unable to grow, diversify, and create the jobs and opportunities they could.
I have recently noted a number of concerning issues and changes in the access to finance landscape – and yet another relevant meaning for this phrase is emerging in our region.
The funding gap was first highlighted in the Macmillan Report 1931 and although it originally applied to equity it has become more widely recognised as applying to all forms of business finance. Sitting in the gap are viable propositions which are not supported by funders, for a variety of reasons, and over the years this gap has widened and reduced according to the economic climate.
At the heart of the issue is an unwillingness of lenders, in any climate, to take a risk that they cannot measure accurately or from which they cannot hope to obtain a satisfactory return on investment.
Those most affected have always been small businesses and early stage businesses, and this remains so according to many reports and evaluations – especially as lending techniques, which some might say have become more sophisticated, have become centred around “the computer says no” attitude, which is closely linked to past credit history rather than future forecasts.
Entrepreneurs in the UK struggle to access finance if they also happen to be located in a disadvantaged area or sector and we have seen the Baroness Mone review for Government published this month. After six months of touring the UK to gather information this review, in most expert opinions, has added little to the debate that we did not know already.
However, there was one significant discovery for those digging with an interest in gaps: the only area that was not visited was the Midlands – an interesting and worrying gap. It appears we are in the gap between London and the North which many, including Baroness Mone, prefer to ignore.
The report also highlighted in a supportive quotation: “Helping more people to become self-employed will help support economic growth and create jobs in some of the most disadvantaged communities, and we will now look at Michelle’s recommendations carefully.”
The Minister who said this is no longer in post, so what will happen now?
The challenge to our leaders in the Midlands, whether from Midlands Engine, Combined Authorities or Local Enterprise Partnerships must surely be to “Find the Gaps” and do something about them! We clearly cannot rely on others.