The SME Finance Taskforce, a group of leading banks, alternative lenders, fintechs, accountancy software providers, payment schemes, credit reference agencies and industry bodies, has developed an action plan to energise the UK economy. The plan will speed up lending and access to finance for 5.5 million SMEs, which employ 60% of the private-sector workforce and deliver over 50% of UK economic turnover.

The seven-point action plan is contained in the taskforce’s first report, Smart Data: improving SME lending to drive economic growth, published today.

The taskforce, formed in April, chaired by the Centre for Finance, Innovation & Technology and supported by an Open Banking Limited secretariat, has found that increasing access to high-quality data will enable SMEs to expand and receive funding that will enable them to grow and scale.

Lending to UK SMEs has fallen by 20% in real terms over the past decade. The resulting funding gap, which is estimated to be more than £22bn, prevents SMEs from investing in their firms, improving productivity and making a greater contribution to the economy.

To unlock the opportunity of increasing SMEs’ contribution to employment, GDP and tax revenues, the taskforce has proposed seven key actions. They are:

1. Prioritise the Digital Information and Smart Data Bill
2. Fund and support an SME “Smart Data Challenge”
3. Review and improve HM Treasury’s Bank Referral and Commercial Credit Data Sharing (CCDS) Schemes
4. Accelerate reform of Companies House, in particular standardisation and verification of Company information
5. Unlock private-sector data by providing digital receipts from HMRC and improved access to tax data for approved organisations
6. Develop and consult on proposals for an e-invoicing scheme for the UK to align with overseas markets
7. Enable greater trust and understanding in using new alternative specialist lenders

Those involved in the CFIT-led taskforce include iwoca, Sage, OakNorth, Allica Bank, Experian, HSBC, Lloyds Banking Group, Mastercard, the Federation of Small Businesses (FSB) and Revolut, ensuring that the action plan has cross-industry support. Together, they are pledged to work in partnership with the Government to grow the UK economy and contribute to policy and legislative development.

CFIT Chair, Charlotte Crosswell OBE, said: “The financial services and fintech industry has worked together to design a comprehensive programme that will energise the UK economy by making the lending experience better for both SMEs and the lenders themselves.

“What’s particularly exciting is that this doesn’t require significant public spending. While policy implementation inevitably takes time, there are so many levers that industry can pull with the support of policymakers, to quickly build momentum, boost SME lending and unlock growth.”

The taskforce’s recommendations build on the blueprint report published earlier this year by CFIT’s inaugural coalition on Open Finance. That industry-wide coalition had demonstrated that Open Finance could deliver more lending to SMEs, with a pilot analysis showing that over a quarter of SMEs who risked missing out on credit could get access to finance with enhanced data-sharing.

Henk Van Hulle, OBL CEO, said: “I’d like to thank the taskforce for its work on the report, and the substantial recommendations it makes to leverage the success of Open Banking and Smart Data to help the UK’s SMEs access the borrowing they need. In particular, the report’s seven-point plan sets out tangible steps towards a wider smart-data economy that can deliver clear economic benefits for the UK.

“OBL is pleased to have played a vital role in the taskforce, providing expert input, taking on the secretariat work and helping to bring a wide range of key stakeholders together.  As part of our remit to support wider initiatives, we also hope that we will be able to use our experience in this area to deliver some of the report’s recommendations.”

Economic Secretary to the Treasury, Tulip Siddiq, said: “Ensuring businesses can access finance quickly and efficiently is critical to their growth and success. New and innovative technologies, such as Open Finance, can play an important part in unlocking the potential of SMEs across the country and I will carefully consider the taskforce’s recommendations.”

Christoph Rieche, CEO and co-founder of iwoca, said: “The new Government has a great opportunity to collaborate with tech-first lenders so that more SMEs benefit from financing and thus stimulate economic growth —a win-win for all. Access to high-quality data is essential for this to happen, such as through direct access to company VAT data and mandating standardised data formats in Open Banking, which will unlock additional finance for millions of SMEs.”

Jane Prokop, Executive Vice President, Small and Medium Enterprises, Mastercard, said: “Increasing lending to SMEs helps build a stronger, more sustainable economic base, as it supports businesses to unlock their growth potential.  Through our Open Banking and SME divisions Mastercard is already supporting innovative financial solutions addressing access to finance for SMEs across the UK and providing them with sophisticated tools to improve their cash flow predictions. The SME Action Plan to boost UK economic growth through access to data is a natural next step in improving financial outcomes for SMEs, and delivering this Action Plan will incentivise the financial ecosystem to invest in the UK.”

Martin McTague, National Chair of the Federation of Small Businesses, said: “Open Finance offers great promise in terms of improving small businesses’ experiences of accessing finance and managing their balance sheets. Helping more small firms qualify for loans will be good for banks, good for the small business community and good for the economy as a whole, allowing those businesses with the greatest potential to grow the funding they need to start their journey, or ascend to the next level. We welcome CFIT’s work on improving success rates for small businesses’ loan applications.”