96% of UK businesses are microenterprises, without responsible finance, many would not exist

Posted On: 
12th June 2018

Businesses often deemed too risky or unprofitable by mainstream banks can thrive with finance and other support from responsible lenders, says Jennifer Tankard, Chief Executive, Responsible Finance. 

What links an artisan fish smokehouse with a luxury chocolatier? Each was supported by a “responsible finance” provider when high street banks couldn’t help them.

What links an artisan fish smokehouse with percussion instrument maker, a luxury chocolatier and a firm manufacturing gear for climbers, bikers and outdoor enthusiasts?

All four outstanding businesses have created jobs and opportunities. Each was supported by a “responsible finance” provider when high street banks couldn’t help them.

And the four firms (The Argyll Smokery, Ruach Music, Harry Specters and Alpkit respectively) were the winners in this year’s Citi Microentrepreneurship Awards, with all award finalists gaining recognition as exemplary businesses.

Recognition for micro-entrepreneurs is important. Much business and industrial policy focuses on larger SMEs and supports already established firms. But microenterprises are vital to the UK. They create jobs and income in local and regional economies, they make up 96% of businesses, and one in seven of the UK adult population now runs their own micro-enterprise.

They innovate too: bringing new products or services to market rapidly; testing, refining, and proving demand.

Start-ups and microenterprises drove the 3.6% growth in the total number of businesses in the UK in 2017. This increase and the rise in self-employment made a large contribution to lowering unemployment.

But the most recent regional and country economic indicators shows wide regional variations in the changes in business numbers.

While there was 7.1% growth in the number of businesses in Yorkshire and the Humber, and 9% in the West Midlands, in the North East there was a 2.7% decrease. In Wales business numbers reduced by over 5%.

Start-up and survival rates for microenterprises are variable. Plenty of folk running microenterprises – or wanting to launch one – have no prior business or management experience. But the biggest barrier preventing people from setting up the business of their dreams is “getting the finance for the business,” according to Micro Business Champion Tony Robinson.

Credit conditions for the SME market as a whole have improved. But trumpeting a return to lending just based on SME figures misses the point. At least 100,000 small business applications for loans are still rejected each year, especially from microenterprises and startups. Many of these declined applications come from businesses that the British Business Bank says are viable.

What a missed opportunity! They are the potential Citi Microentrepreneurship Awards (CMAs) winners of the future. The UK needs their innovation and drive. We need their employment and job creation, catalysing growth in some of the most deprived parts of the UK.

Help is at hand though. 27 responsible finance providers specialise in ethical and affordable lending to businesses which struggle to get finance from the mainstream banking industry.

The businesses they lend to are often deemed too risky or unprofitable by mainstream banks due to a lack of trading history or small scale. Yet with the finance and other support that responsible lenders offer, they can thrive.

The 16 finalists and winners in the CMAs prove just that. They are a diverse range of businesses, across multiple sectors from manufacturing to artisan food; pharmaceuticals to retail; hospitality and social enterprise and more.

All have grown their ideas into enterprises that are creating jobs and opportunities for their local community.

And each was supported by a responsible finance provider when they were unable to access traditional finance to develop.

The artisan fish smokehouse, Argyll Smokery, supplies wholesalers, retailers and supermarkets. It was awarded the prize for Sustainability in the Citi Awards. Young microentrepreneur of the year, Stephen Henderson, founded Ruach Music, a traditional “cajon” percussion instrument maker which now employs 8 full time staff and sells instruments worldwide. Social Enterprise of the Year, Harry Specters is a deluxe chocolatier training and employing autistic people. Alpkit manufactures and sells gear for climbers, bikers and outdoor enthusiasts, and scooped the CMA for growth – the business now has over 60 staff.

Like so many micro-enterprises, they’ve all brought new and innovative solutions and products to market. Without responsible finance, it’s probable that these businesses – and the jobs they’ve created – would not exist.

The achievements of all of the businesses shortlisted in the Citi Microentrepreneurship Awards are truly impressive.

I’m proud that our members lent £67 million to over 5,000 businesses in 2017.

But I’m also proud of the non-financial support they offer, which entrepreneurs such as Charlotte Purdie of The Milk Lounge and Stephen Henderson of Ruach Music (both young Citi Microentrepreneurship Awards finalists) say is the difference between success and failure.

More and more people want to start their own business. The recent Pathways to Progress Global Youth Survey 2017 found 69% of young people interviewed dreamt of owning their own business.

Without access to affordable, responsible finance – and the support that comes with it – many aspiring microentrepreneurs won’t have a chance of fulfilling their potential.