̶   Equity investment in smaller businesses surged 130% to £14bn in the first three quarters of 2021 relative to the same period in 2020 (£6.1bn) and on course to double compared to 2020[1]

̶   Bank lending returned to close to pre-pandemic levels, with 2021 lending down 45% from 2020

̶   Almost half of smaller businesses see reducing their carbon emissions as a priority; over a fifth would use external finance to improve their environmental impact

̶   Disparities in access to finance remain, with Ethnic Minority-led firms around twice as likely to cite access to finance as a barrier

Published today, the British Business Bank’s Small Business Finance Markets 2021/22 report highlights a surge in equity investment into smaller UK businesses last year. £14bn was invested over the first three quarters of 2021, a 130% increase on the £6.1bn invested over the first three quarters of 20201. With one quarter still to go, investment has already exceeded the £8.7bn invested in the whole of 2020. At the same time, the report shows that bank lending has returned to close to pre-pandemic levels, with 2021 lending down 45% from 2020, driven by lower drawdowns of government-supported loans.

Economic recovery

The report suggests there could be continued economic recovery throughout 2022, with strong demand expected for investment to fuel business growth. Although 2022 may still provide a challenging environment for some businesses, many others report that they are seeking to pivot towards growth, improve productivity and transition to a net zero economy.

Small business debt

The amount of debt held by smaller businesses has significantly increased compared to pre-pandemic levels due to businesses accessing the government’s Covid-19 emergency finance schemes. At their peak in March 2021, smaller business debt stocks were estimated to be 30% up. Encouragingly, however, debt repayments are becoming a smaller share of businesses cash flow as UK economic recovery helps boost their turnover. The proportion of small and medium sized businesses with debt repayments making up more than 50% of turnover has declined since early 2021. For businesses with between 100 and 249 employees, just 2.5% report debt repayments above 50% of turnover, down from a peak of around 5.5% in February last year.

As well as debt markets overall returning to near pre-pandemic levels, there are other indicators of a rebound in activity. Challenger and specialist banks accounted for just over half of the bank lending (51%) – a record share, up from 32% in 2020 – while private debt, asset finance, invoice finance & asset-based lending, and alternative finance all experienced rebounding levels of activity after a difficult 2020.

Catherine Lewis La Torre, CEO, British Business Bank, said: “As smaller businesses look to recovery and growth following a challenging economic period, finance will continue to play a crucial role. With our mission to drive sustainable growth and prosperity across the UK, and to enable the transition to a net zero economy, the British Business Bank will continue to support the country’s smaller businesses by improving access and options to secure external finance.”

Small Business Minister Paul Scully said: “This report shows a massive 130% increase in equity investment into smaller UK businesses, which is a hugely positive step forward in our recovery from the pandemic.

“However there is clearly more to do to get ethnic minority and women-led businesses on to a level playing field when it comes to accessing finance. The Government will continue to work with the sector, including through Start Up Loans and the Rose Review of female entrepreneurship, to ensure everyone has the tools they need to succeed.”

Demand and supply-side factors contribute to geographic imbalances in access to finance

The data shows that both demand and supply-side factors are contributing to geographic imbalances in finance flows. Long-run data covering 2019 to mid-2021 show London businesses remain more open to using finance, with 37% happy to use finance to grow compared to 29%-32% of smaller businesses in most other parts of the UK.

While the UK hosts a large number of rapidly growing businesses, external finance remains highly concentrated in the capital compared to other regions. London firms attracted 70% of 2021 Q1-Q3 investment value. This is partly due to the geographic location of the equity investors themselves, which are predominantly based in the capital. This was also evidenced in the Bank’s first Regions and Nations Tracker, published in October 2021, which showed 82% of equity investment stakes in the UK are between investors and smaller businesses located within two hours of each other. 

Despite these inequalities, the British Business Bank’s regional funds programmes continue their success in delivering regional access to finance, with the Northern Powerhouse Investment Fund recently surpassing £300m direct investment, and the Midlands Engine Investment Fund reaching its £150m investment milestone.

Breaking down barriers in access to finance in the regions and Nations remains key to levelling up economic opportunity. That is why the British Business Bank remains committed to addressing regional disparities in access to external finance, and is reflected in the recent Spending Review, at which the Bank was provided with additional £1.6bn for new regional funds and a further £150m for regional angel investment. In 2021, the Bank’s core programmes are estimated to have deployed more than £979m of finance to businesses outside of London.

Almost half of smaller businesses view reducing carbon emissions as a priority

In 2021, almost half (47%) of smaller businesses viewed reducing their carbon emissions or environmental impact to be a priority for their business and one in five (22%) would use external finance to help transition their business to net zero. Just over one in 10 (11%) of smaller businesses have already used external finance to support net zero actions.[2]

In contrast, almost three quarters of smaller businesses (71%) viewed maintaining or increasing sales to be a high priority, and almost two-fifths (37%) would be happy to use external finance to grow their business.

Research suggests equity investors are increasingly considering environmental factors in investment decisions. A survey of UK VC fund managers conducted by the British Business Bank indicated that the vast majority (83%) are now taking into account environmental factors within investment decision making, and more than half (52%) see ESG factors as a significant part of their investment decision making process. This has in turn led to an increase in clean tech investment in the market.

In 2021, the British Business Bank introduced a new climate change objective that commits it to supporting the UK’s transition to a net zero economy, alongside joining relevant initiatives such as the Race to Zero campaign and Business Ambition 1.5C.

Half of Ethnic Minority-led businesses are open to using finance for growth

The report also indicates that Ethnic Minority-led businesses are more open to using finance and more ambitious for business growth but access to finance remains an issue. Half (50%) of Ethnic Minority-led businesses are open to using finance for growth compared to a third (32%) of White-led businesses. More Ethnic Minority-led businesses (64%) have ambitions for significant growth compared to 39% White-led businesses.

Despite this, Ethnic Minority-led businesses are more likely to be discouraged from applying for external finance and having their application turned down, leading to negative impacts on their business. Although rejection rates have declined in recent quarters, most likely reflecting the impact of government-backed loan schemes, they remain significantly above those for White-led firms, with data showing that 18% of Ethnic Minority-led businesses were turned down for finance between Q3 2020 and Q2 2021, compared to only 10% of their White counterparts.

As a consequence, Ethnic Minority-led firms are around twice as likely to cite access to finance as a barrier (23%) than White-led businesses (12%). Additionally, most (56%) Ethnic Minority-led businesses currently using finance agreed they thought it would be difficult for them to obtain finance again, compared to 42% of White-led businesses.

Amongst female-led businesses, appetite for external finance has significantly increased to 31% in Q2 2020-Q2 2021, but remains lower than for male-led businesses at 39%. Female-led businesses are also more likely than male-led businesses to be discouraged from applying for finance, citing issues such as uncertainty over where to find finance and concern over the application process being too burdensome. Despite this, only 12% of female-led businesses view access to finance as a barrier, broadly in line with male-led businesses (13%).

The British Business Bank runs the Start Up Loans programme to help entrepreneurs from under-represented backgrounds start up and scale a business. Around 36,000 (40%) of loans have gone to female entrepreneurs and around 18,000 (21%) to entrepreneurs who belong to an Ethnic Minority group (excluding white minorities): almost 8,000 (9%) have gone to female entrepreneurs from Ethnic Minority backgrounds.

ENDS

• Pool A, B, C, D & F Capability and Innovation Fund recipients provide quarterly updates on Public Commitments
• Incentivised Switching Scheme residual funds recipients provide final progress updates on Public Commitments

Progress updates for Pool A, B, C, D & F recipients

The Board of Banking Competition Remedies Ltd (BCR) today publishes progress updates for Pools A, B, C, D and F recipients, providing a summary of performance against their public commitments to the period 31^st December 2021.

The public commitment updates this reporting period has seen a number of awardees deliver on their commitments such as co-investment and initiative delivery. Furthermore, market share of UK SMEs continue in an upward trend with awardees exceeding overall targets ahead of schedule.

Awardees progress against public commitments made can be found here. During the quarter business case changes were approved for Metro Bank to revise delivery timelines for some delayed initiatives and Modulr to replace one of its initiatives with one that it feels better meets SME needs.

The majority of awardees achieved strong performance as at the end of 2021 in terms of delivery particularly in lending initiatives, international payment solutions and market share. It is clear that many of the awardees are successfully challenging incumbent providers in meeting SME needs and in several instances partnering with those incumbents to complement their offerings. 2022 is a significant year in relation to spend and delivery with several awardees ahead of plan and others working extremely hard to progress their business cases in view of the external market which is now seeing a slow recovery in all aspects despite the challenges they continue to face.

A summary of performance against awardees public commitments can be found in the notes to editors, with links to the full updates provided below:

Pool A eleventh quarter update

• Starling Bank Limited public commitment progress update
• Metro Bank plc public commitment progress update
• ClearBank Ltd public commitment progress update

Pool B tenth quarter update

• Investec Bank plc public commitment progress update
• The Co-operative Bank plc public commitment progress update

Pool C ninth quarter update

• Atom Bank plc public commitment progress update
• The Currency Cloud Group Ltd public commitment progress update
• iwoca Ltd public commitment progress update
• Modulr Finance Limited public commitment progress update

Pool D tenth quarter update

• Codat Limited public commitment progress update
• Fluidly Limited public commitment progress update
• Form3 Ltd public commitment progress update
• Funding Options Limited public commitment progress update
• Swoop Finance Limited public commitment progress update

Pool F first quarter update

• Cashplus public commitment progress update
• Codat Limited public commitment progress update
• Swoop Finance Limited commitment progress update

The next progress updates for Pool A, B, C, D and F awardees will be in May 2022. Pool E awardees will provide their next reporting update in April 2022. As part of BCR’s role in monitoring the way that organisations are using the funds, BCR holds awardees to account on their progress against business plans which includes regular meetings with all recipients. For more details on how BCR monitors CIF awardees see here.

Incentivised Switching Scheme

At the end of December 2021, the agreements in respect of the additional £24.1m awarded to Starling Bank, Virgin Money and TSB from the pool of funds set aside for the Incentivised Switching Scheme ended. It has been encouraging to see the good use this money has been put to in raising brand awareness of their respective SME offerings as well as the service enhancements that have been made and the educational material provided. A further 436 customers switched from NatWest in the period to December with incentives funded by the award. In the interests of transparency, it should be noted that a modest amount of £194,000 has been returned by TSB – in line with the terms of the award agreement - due to a small underspend against its business case. Further detail on each bank’s performance against its public commitments can be found here.

We have been observing with growing alarm and concern the unfolding of a fully-fledged armed conflict in Ukraine.

Our thoughts are with all those enduring catastrophic loss of life and human suffering but also with those in our own community who have been touched by the conflict, especially those with families in the region.

Following the Home Secretary’s new guidance on visa concessions, Zopa stands ready to:

·       Immediately sponsor up to 50 work visas of eligible Ukrainian applicants already in the UK with backgrounds in engineering, technology, and data analytics or with experience in consumer financial services to provide a path to their ongoing security in the UK.

·       Fast track the assessment and selection of those Ukrainians wanting to join their British national family members in the UK, giving successful candidates certainty of a role with Zopa and the ability to onboard remotely from secure locations.

·       Provide a relocation allowance of one month’s salary to support moving costs on receipt of right to work in the UK.

We are working with the Ukrainian Embassy in London and Ambassador Vadym Prystaiko to facilitate the process and encourage fellow members of our tech and fintech communities to extend their support.

Eligible Ukrainian applicants can email UkraineSupport@zopa.com to find out more, or visit our careers page https://www.zopa.com/about/careers to apply for a fast-tracked role, identifying their current situation in the online application form.

Customers of Zopa impacted by the crisis should contact us through our customer services channels, details can be found at www.zopa.com/help

Today payabl. the international merchant acquirer that enables businesses to take payments easily, reliably and securely, announces it is joining forces with RegTech provider Know Your Customer, to offer fully digital, secure and seamless onboarding to merchants worldwide. With explosive growth being experienced in the online payments sector, this is yet another step the company has taken to prioritise its customers by enhancing the onboarding process, allowing merchants to be up and running as much as five times faster.

By working with Know Your Customer, payabl. will now be able to leverage real-time registry connections and AI-based shareholder data extraction, to deliver a remarkable user experience for merchants, accelerating due diligence procedures and account activation across multiple jurisdictions. 

Isavella Frangou, VP Sales and Marketing of payabl., commented, “Here at payabl. we recognise that our merchants' time is precious, and prioritise offering a straightforward, frictionless onboarding experience. The collaboration between payabl. and Know Your Customer is evidence of that endeavour, and allows us to further expedite the process, helping us get new clients up and running in no time.”

Since being established in 2011, payabl. has worked as a partner with its customers. With worldwide eCommerce sales expected to rise to $7.38 trillion in 2025, there’s never been a more important time for businesses to focus on their online sales. payabl.’s latest partnership with Know Your Customer enhances its seamless business solution even further. 

Claus Christensen, CEO & Co-Founder of Know Your Customer, added, “The ability to deliver a truly seamless onboarding experience to merchants is becoming an absolute priority in the increasingly competitive payments market, both across Europe and globally. We are delighted to be working with payabl. in this area, as we share a common vision of customer-centricity powered by real-time data and deep automation across multiple business areas.”

Know Your Customer capabilities are fully integrated with payabl.’s internal systems through APIs.

Ignition Advice, the global provider of advice technology, has appointed Will Drew as its new Chief Operations Officer for Europe.

Will comes to Ignition with 20 years of industry experience across a range of sectors, having worked at wealth managers, insurance providers and retail banks. Prior to joining Ignition, Will was Head of Account Management for Bravura Solutions, a global provider of software solutions. Before that he was a Director within Deloitte’s Technology Consulting practice, specialising in digital transformation.

In his role as Ignition’s new COO for Europe, Will’s responsibilities include overseeing client services associated with Ignition’s Software-as-a-Service (SaaS) proposition, working closely with existing clients and overseeing the business expansion to onboard new clients within the UK and Europe.

Ignition launched in the UK in May 2021 and was appointed by wealth manager M&G Wealth to deliver the firm’s new digital advice offering for its advisers and customers.

Terry Donohoe, CEO Europe, Ignition, said: 

“We are pleased to welcome Will to Ignition's growing global team. Will’s extensive industry expertise and understanding will be extremely valuable as we continue our expansion. The UK remains at the forefront of the digital advice revolution and our hybrid technology is already allowing firms to capitalise on this, combining digital assistance with human expertise to offer a superior experience for their customers.”

Will Drew, COO Europe, Ignition, added:

“I am delighted to have joined Ignition and I’m excited about the scale of evolution in financial advice provision that we will see in the next few years. I look forward to supporting our clients through an incremental, iterative and controlled transformation approach, and helping them embrace the opportunity presented by hybrid digital advice.” 

Equiti Group has announced the appointment of Marta Ilbak as Global Head of Human Resources.

Marta brings a wealth of diverse human resource management experience having worked in a range of HR roles across Europe, the Middle East, and Africa. She joins Equiti from tech unicorn Deliveroo where she worked as Head of People. In this role, she was mainly responsible for business expansion, organisational design, and talent evaluation and development programs for human capital. She also managed a major redesign of HR processes and systems in the Middle East in preparation for the company’s IPO in April 2021.

Iskandar Najjar, Equiti Group CEO, said: “I’m very pleased to welcome Marta and excited about the initiatives she will bring to Equiti Group. I’m looking forward to Marta’s contribution to our performance and delivery culture, the continued expansion of our offices and people, as well as growth of our talent development and management initiatives.”

Marta Ilbak, Global Head of Human Resources, said: "I have been very impressed by the energy, drive and openness of the management and employees at Equiti. My goal is to drive the company’s HR agenda with purpose and passion, develop career progression opportunities and create a great place to work based on integrity, agility, and the best global HR standards.

Marta has a Bachelor’s degree in Human Resources Management and a Diploma in Business Administration and Economics from the University of Wuppertal in Germany.

She succeeds Nigel Holmes who has successfully held the role of Global Head of HR since Equiti Group’s inception in early 2017.

• Innovative banking concept in Malaysia: An Islamic cloud-based digital bank with modern technology
• Leverages GFT BankLiteX accelerator built on Thought Machine core banking technology and running on Amazon Web Services (AWS)

The digital revolution has taken a quantum leap throughout the global financial services industry over the last decade. In Asia-Pacific alone, there have been over 20 new digital bank licenses issued with more to come in Malaysia.

The global management consulting firm Oliver Wyman and technology and software engineering leader GFT are supporting Al Rajhi Bank Malaysia (ARBM) to design, build and launch a cloud-based digital bank. To set new standards of excellence for Islamic banking in Malaysia, ARBM will undertake a complete digital redesign of their products, services, and channels for this new digital bank.

“We are tapping into the vast potential of innovation and partnering with key experts to provide added value to our customers and better serve the Malaysian market, and ARBM is seizing the opportunities in both digital banking and Islamic finance by striving to become the number one Islamic finance innovation bank in Malaysia,” said Arsalaan (Oz) Ahmed, Chief Executive Officer, ARBM.

“The architecture and technology stack we’ve recommended will allow ARBM to provide disruptive, mobile-first, and highly scalable banking services,” said Dan Jones, Partner, Oliver Wyman Digital.

“After our success with the mobile bank Mox in Hong Kong that was awarded the 2021 Celent Model Bank Award for Retail Digital Banking, we are thrilled to be collaborating with Oliver Wyman to support the design, build and launch of ARBM’s digital bank. This new digital bank will enable ARBM to respond to its clients’ needs for simpler, faster and better banking,” said Chris Ortiz, Global Markets and Region Manager APAC and UK at GFT.

“We have invested significantly in innovation as we lay the foundation of a customerfocused digital bank which offers best-in-class digital banking propositions and channels to benefit ARBM’s individual and business customers,” added Arsalaan (Oz) Ahmed.

Pamela Mead, VP of Design at UK-based financial services provider SumUp (www.sumup.co.uk), has been announced to be one of The Financial Technology Report’s Top 25 Women Leaders in Financial Technology. 

The accolade, awarded to those who demonstrated exceptional skill in their respective positions, is evaluated based on substantive reviews from peers and colleagues both within their organisation and from across the industry. The award reaffirms both Pamela’s position as an industry leader, as well as SumUp’s prominence in the fintech landscape. The achievements of Pamela, and all women across the sector, have played a key role in the development of the fintech industry over the past twelve months. 

Pamela Mead has amassed over 15 years of experience building design teams in companies ranging from Tefefónica, to Delivery Hero, to Yahoo! Mobile. Specialising in utilising emerging technologies to create accessible and useful products, Pamela has had a key role in SumUp’s holistic approach to payment technology. 

Pamela joined the SumUp team in autumn 2019, heading up the design organisation. Central to her role is turning SumUp’s services into a cohesive, powerful and personal service that offers merchants of all sizes the tools they need to effectively run their business. Pamela and her team's work has been crucial to furthering the narrative that SumUp is, and must be, more than just a payment terminal.

Since joining SumUp, Pamela and her team have implemented a research-based approach to generating SumUp’s UX strategy, basing all product, marketing and design work on user research and data. In doing so, Pamela has helped better broach the needs of SumUp merchants, allowing them to thrive over a difficult period for small businesses.  

Championing accessibility as central and foremost to product design, Pamela’s goal to create solutions that are effective, useful, but ahead of everything inclusive to all merchants, has played a key role in the development of SumUp products since her recruitment. 

Pamela Mead, VP of Design at SumUp, comments: “I’m immensely proud to be recognised as one of the top 25 Women Leaders in Financial Technology. Diversity and inclusion are at the epicentre of my work, so getting the chance to be a role model for young women looking to break into the industry is massively important to me. The quality and experience of all the women included on the list is humbling, and to be included in such esteemed company is an honour.”

Michael Schrezenmaier, CEO Europe at SumUp, comments: “Pamela is an outstanding professional, and it is wonderful to see her receive the recognition she deserves. A genuine leader and innovator in her field, Pamela embodies the values and characteristics that lie at the heart of SumUp. It is in SumUp’s DNA to continuously promote inclusion and diversity across the board, and celebrating the achievements of Pamela and other female leaders plays a key role in inspiring the next generation of fintech professionals.”