Bath/Head Office & Unquoted Equity Team:
London Office & Quoted Equity Team:
Critical time for SME investment

Critical time for SME investment

The IMF’s recent upgraded growth forecast for the UK caps a series of announcements and market analyses indicating that economic recovery is underway. Whilst it is clear that the recovery remains weak compared to that following previous recessions, after five years of a negative growth, it is welcome news all the same. One of the most compelling statistics published in recent weeks, however, is on the subject of business lending.  Despite sharp rises in business confidence in both the manufacturing and service sectors, official figures show a surprising fall in business lending. According to Bank of England statistics, loans to non-financial firms fell by £1.3 billion in May, including a £452 million drop in lending to small and medium-sized companies. No one is in any doubt that the “green shoots of growth” are now starting to appear, however, as these figures show, the banks are still unwilling to lend to SMEs.  It is a frustrating situation, as the strength of the UK’s export balance demonstrates that businesses have the potential to expand, and we could have a much stronger recovery if finance was more readily available. On the positive side, the generous allowances and schemes from the government, encouraging investors and Clubs like ours to support UK SMEs and provide a much needed source of funding, have never been better. From both a fundraiser and investor perspective the timing for these types of investments, with the economic recovery underway, is crucial in terms of sustaining growth and providing compelling, investment opportunities that represent good value for investors over the medium to long-term. The Investor Club expects to make some £6m-£10m worth of investments in our first year (to June 2014).  These investments will be focused exclusively in UK businesses with an enterprise value of between £0.5m-£5m, which is an area long overlooked by private company equity providers, as well as banks.