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Improving access to finance for small and medium-sized enterprises

Despite a renewed focus by government on the financing challenges facing small and medium-sized enterprises (SMEs), there is scope for the range of funding initiatives currently in place to work as a more unified programme, according to the National Audit Office.

Preparations for the Business Bank, which was publicly launched in October 2013 but will  start operating as an independent entity in 2014, prompted the Department for Business, Innovation & Skills (BIS) to re-examine the nature of the finance problems facing SMEs. These include a possible need by SMEs by 2017 for an additional £22 billion over and above the finance available to them.

BIS and HM Treasury are able to draw on an increasingly strong body of data to inform decision-making, including Bank of England reports on credit conditions, the SME business barometer and aggregated information from the British Bankers’ Association on loan applications and approvals. Today’s report found that, at present, although BIS and HM Treasury both have teams dealing with ‘enterprise’ policy, there is no formal research programme joining the Departments with other departments, such as HMRC, with an interest in SMEs.

One of the Treasury’s priorities is to support the development of new routes to finance for SMEs, while BIS schemes target specific parts of the market. To date, the Departments have not articulated clearly enough what the various schemes are expected to deliver as a programme.

The NAO found that BIS-led schemes such as the Enterprise Finance Guarantee and Start-Up Loans provided direct support to around 5,900 firms in 2012-13, and the current schemes are generally performing positively in terms of meeting the largely activity-based success measures set for them. BIS has also taken steps to provide better explanations to SMEs on the options available to them for financing their business, but raising the profile of the help available will be a challenge for the Business Bank.

“Access to finance is a significant and enduring problem for many small and medium-sized businesses. There is a range of schemes led by the Department for Business, Innovation & Skills to address areas of the market where there are problems. But there is work to be done in terms of managing the schemes as a unified portfolio and articulating what they are intended to achieve as a whole. Given the importance to the Government of promoting growth, greater benefits and public value could be achieved through treating the interventions as a programme, with a clearer focus on assessing what results can realistically be delivered.”

Amyas Morse, head of the National Audit Office

Notes for Editors


Small and medium-sized enterprises (firms with fewer than 250 employees and turnover of less than £50 million) in the UK

Potential gap, by 2017, between the amount of finance available to small and medium-sized enterprises and the amount they actually need

38 per cent
Of small and medium-sized enterprises that are less than five years old and apply for a bank loan have their application rejected

14.1 million
People in the UK are employed in small and medium-sized enterprises

£170 billion
Of outstanding lending to small and medium-sized enterprises by UK financial institutions, of which around £17 billion is in the form of overdrafts

£120 million
Of funding available to support start-up companies in the form of small loans (typically around £5,000) under the Start-Up Loans scheme

Average loan under the government's Enterprise Finance Guarantee scheme

52 per cent
Of small and medium-sized enterprises are aware of the principal bank and government initiatives designed to improve access to finance

  1. Press notices and reports are available from the date of publication on the NAO website, which is at Hard copies can be obtained from The Stationery Office on 0845 702 3474.
  2.  The National Audit Office scrutinises public spending for Parliament and is independent of government. The Comptroller and Auditor General (C&AG), Amyas Morse, is an Officer of the House of Commons and leads the NAO, which employs some 860 staff. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether departments and the bodies they fund have used their resources efficiently, effectively, and with economy. Our studies evaluate the value for money of public spending, nationally and locally. Our recommendations and reports on good practice help government improve public services, and our work led to audited savings of almost £1.2 billion in 2012.
  3. The Business Bank was publicly launched in October 2013, with Ron Emerson announced as Chair and Christina McComb as Senior Independent Director.  It will start operating as an independent entity in 2014.


PN: 61/13