By Daniel Hunter
The CBI is urging the next government to ‘mind the gap’ in the financial services sector’s ability to help unleash new long-term growth capital to support dynamic medium-sized businesses.
After the financial crisis, the UK has rebalanced away from traditional bank debt because of balance sheet restructuring and regulatory change. Despite the encouraging increase in short-term alternative finance, the lack of long-term growth capital, and difficulties in accessing trade finance, are impacting on medium-sized businesses’ ability to grow. In addition, the shortage of capital investment in infrastructure is holding back growth in the wider economy.
To boost the availability of long-term growth capital, a new CBI report, Financing our Future Economy, calls on the next government to promote a market for privately placed debt, which the Breedon Review (1) estimates could unlock up to £15 billion.
High-growth countries now account for the majority of world growth but two thirds of global trade finance providers (69%) said complex anti-money laundering (AML) regulation and ‘know your customer’ requirements are acting as a major barrier to firms getting the trade finance (2). That’s why the CBI is calling on the Treasury and Department for Business to launch a review of the impact of these measures.
John Cridland, CBI Director-General, said: “The UK is still missing a trick on long-term growth capital. The next government needs to mind this financial gap otherwise our medium-sized firms - the job creating dynamos of the economy - will suffer.
“In the same way that the profile of alternative finance has increased, we want to see politicians getting behind a UK market for privately placed debt and backing the use of equity finance, to stimulate investment and long-term business growth.
“If firms can’t get the trade finance they need to explore new markets, the UK has no way of meeting its ambitious exports target of £1 trillion by 2020.
“Of course we must have robust anti-money laundering regulations but the detailed application can be cumbersome and complex and is acting as a brake for businesses wanting to sell their products and services around the world."