IED Bournemouth, 2009 Current & Future Small Firm Credit Policy 1 Building a Smarter Economic Future The UK Economic Development Conference October 2009 Royal Bath Hotel, Bournemouth

IED Conference Workshops 2009 Current & Future Small Business Credit Policy Dr Richard Roberts - SME Market Analysis Director Bournemouth, October 2009

IED Bournemouth, 2009 Current & Future Small Firm Credit Policy 3 Size & Scope of Small Business Credit Market

IED Bournemouth, 2009 Current & Future Small Firm Credit Policy A Golden Era? (Too?) Rapid rate of economic growth Significant expansion of the small business population Growth in both the stock and flow of small business lending Fairly high levels of customer and official satisfaction with the debt markets

IED Bournemouth, 2009 Current & Future Small Firm Credit Policy What has changed? Worst real economy recession since the early 1980s (twice as deep as early 1990s) and close to the experience of the 1930s Most severe disruption to financial markets since the 1890s Banks small business customers believe that debt markets have closed and this significantly impacts on ability to do business Government believes this as well – hence change in the scale and targeting of public intervention in the debt market to address the finance gap with the Enterprise Finance Guarantee

IED Bournemouth, 2009 Current & Future Small Firm Credit Policy 6 Cyclical Turmoil

IED Bournemouth, 2009 Current & Future Small Firm Credit Policy 7 Structural not Cyclical Developments Increase in the cost of capital for banks (indeed across economy wide) Prospect of greater regulation Consumer and financial Mortgage equity release no longer subsidise the small business credit system Open up old wounds – financial inclusion

IED Bournemouth, 2009 Current & Future Small Firm Credit Policy 8 Future Developments First time since late 1970s, public authorities hold the key – EFG replacement, direct shareholdings and local/regional initiatives Two broad directions to travel Patch up and wait for cyclical upswing A more integrated approach which acknowledges shortcomings and builds solutions

IED Bournemouth, 2009 Current & Future Small Firm Credit Policy 9 Partnership Approach? Commercial banks CDFIs, local loan funds Charities, unclaimed assets etc EFG2, EIB funds etc Area of policy gap

IED Conference Workshops 2009 Current & Future Small Business Credit Policy Dr Richard Roberts - SME Market Analysis Director Bournemouth, October 2009 Thanks for your attention

IED Bournemouth, 2009 Current & Future Small Firm Credit Policy 11 Building a Smarter Economic Future The UK Economic Development Conference October 2009 Royal Bath Hotel, Bournemouth