As highlighted in the Chairman’s report, this year has been a story of being asked to do more, deliver more, and develop more to help scale-ups, as well as continuing to deliver for start-ups and stable and sustainably growing businesses.
During the year, we have developed new finance initiatives which both serve the needs of smaller businesses and support the Government’s key priorities – including the new Northern Powerhouse and Midlands Engine Investment Funds and the Help to Grow programme.
Our balance sheet has shown substantial growth – confirming that we ourselves are a fast-growing business in scale-up mode.
Against our four Key Performance Indicators we have delivered in 2015-16:
- an increase of 45% in the total stock of finance offered through the Bank’s programmes;
- increased support for diversity in the market by working overwhelmingly through smaller banks, non-banks, alternative lenders and equity investors;
- better information on finance options, contributing to an increased awareness of alternative finance options amongst SMEs;
- a 2.0% return on capital deployed, exceeding the target set by Government.
The financial statements for British Business Bank plc show a net operating profit of £31.8m. Although we expect to make a positive return on our Enterprise Capital Funds, accounting standards require us to recognise up-front provisions on new commitments in this programme. These provisions are unwound as funds are deployed over future years. These are not provisions for bad debts and are expected to unwind over future years.
We’ve always said that we will adapt to market conditions, flexing our offering to best serve the needs of the UK’s smaller businesses. Our Small Business Finance Market report, published this February, indicated that business requirements were changing from working to growth capital. As a result, we dedicated more of our resources to asset finance and growth finance, including early stage venture capital. The report also illustrated that more needs to be done to build a diverse marketplace for finance, offering smaller companies more choice. Through our ENABLE programmes and British Business Bank Investments we are now supporting challenger banks, a range of asset finance providers and a growing number of private debt funds, as well as fast growing marketplace lenders.
But larger lenders are important partners, also – Lloyds Banking Group has recently led the way on our Help to Grow offering by becoming the first partner under the programme – and we continue to work with the larger banks in providing much needed debt to companies with less collateral or a short track record through the Enterprise Finance Guarantee programme. Recommendations from the programme’s recent review will enable us to make it more widely accessible, benefiting smaller businesses, our partners, and the wider economy.
Alongside our activities on the supply side, we have been closely involved in delivering measures to increase smaller business demand for, and confidence in, a wider variety of finance options. In 2015-16, we advised HM Treasury on the designation of new finance platforms that will accept referrals of smaller businesses that have been declined facilities by their bank. The first three platforms were announced at Budget 2016 – a world first for an initiative of this sort. In addition, we provided advice to HM Treasury on the designation of credit reference agencies that will use increased information from banks to make credit score data more widely available to a broader range of lenders.
We were also pleased to recently update our popular Business Finance Guide, which we publish jointly with ICAEW’s Corporate Finance Faculty, with a new digital presence at thebusinessfinanceguide.co.uk. The guide is already accessible to more than a million smaller businesses, helping them understand and access the type of finance they need.
2015-16 has been a year of growth and momentum. As we enter a period of increased uncertainty following the EU referendum, we will redouble our efforts to support key segments of the small business finance market, helping the UK’s smaller businesses realise their potential.