Monday Interview: North-South divide will only widen following Brexit says BEF chief

THE chief executive of the Business Enterprise Fund has warned of an “access to finance crisis” following the Brexit decision, particularly for growing startup sector.

BEF, a social enterprise lender focusing on Yorkshire, the Humber and the North East, has seen a surge in the number of startups over the past year.

They made up 54% of the loans the BEF provided last year, overtaking more established SMEs for the first time since its first loan in 2004.

This is only set to increase. According to StartUp Britain, run by the Centre for Entrepreneurs, there has been an increase in startups every year since 2011. There are now 3.7m businesses in the UK – one for every 17 people.

This year so far 408,186 businesses have been created, although the full effects of the Brexit decision have not yet been felt.

“There are more and more people choosing to start up their own business rather than having to be on the dole or enduring a job they don’t like,” said Mr Waud.

“This suggests there is more support and infrastructure out there, through informal networks and social media to allow them to start a business.

“This is a complete contrast from five years ago. People that are disenfranchised or have been made redundant are now they’re willing to have a go. There is a general confidence out there, there is more cash in people’s pockets, and people are less intimidated about the idea of starting their own business.”

Mr Waud said that although the “fat lady has not quite left the building” on Brexit, the North-South divide is likely to widen if it is carried through, particularly affecting smaller businesses. The £5bn rebate from the UK’s contributions to the European Union came with mandatory clauses to spend it in the most disadvantaged regions to stimulate the local economy, he said, the removal of which is likely to put a strain on those communities.

Mr Waud said: “On the face of it the government had no plans and was not instructed to come up with any plans, it would seem that we are on the back foot right now, just beginning to see the mammoth entanglements we have with the EU.”

But the big issue for the BEF at the minute is a major multi tens of million pound fund which is has been negotiating for a number of years. He said it was contingent on utilising European guarantee mechanisms.

“As long as article 50 is not invoked before the end of year, the paperwork should be signed. If it is triggered before then, the £75m funding goes.”

Mr Waud said he was not entirely confident that the new Government under Prime Minister Theresa May would have the resource to be able to match the guarantee funding should it fall through.

He said: “The Cameron Government was less supportive in helping SMEs access finance than other governments, such as the previous Coalition government.

“We have sufficient legacies to continue to lend, and although banks have improved funding, demand for finance has kept growing.”

The promised and much-anticipated £400m Northern Powerhouse Investment Fund would assuage fears, but is vulnerable under Brexit, he said.

“The practical outcome for the North in the short term is uncertain. Current European-funded business support funds are on hold. The Government should be saying that we will commit to this whatever.
“The region needs to hear assurances from the Government that guarantee funding for the region.

“Everything in the poorer industrial heartlands are in the same position. The areas that have been most impacted by the loss of industry will be the ones that suffer most.

“How does this £400m fund sit with an austerity policy? Perhaps we can’t afford it, and the regions will suffer in the end. Ironically the ones who voted for it most will suffer most because of it.”