THE UK is far behind its European counterparts in supporting small- and-medium-sized enterprises (SMEs), ThinCats claims.
The peer-to-peer business lender has said that government support for SME finance is just a “tiny fraction” of what is provided in Germany and that a lack of investment in UK SMEs is holding back productivity in our economy.
Support by the British Business Bank pales in comparison to German state lender KfW, ThinCats said in a blog post on its website on Monday. The BBB has assets of £14bn compared with €472.3bn (£421.3bn) at KfW.
ThinCats said the BBB’s assets represented less than 0.1 per cent of the UK’s annual GDP while KfW’s equate to 16 per cent of Germany’s GDP.
The lender warned UK productivity is almost 20 per cent below its pre-crisis level and as much as one-third below that of the US, Germany and France.
“Britain stands in stark negative contrast to Germany in regard to the SME investment that can push this diffusion,” ThinCats said. “UK banks lend six per cent of their assets to corporates, whereas Germany’s lend more than three-times that.
“We know from our experience, that these loans tend to be of what the banks’ determine to be a low-risk nature. It does not encourage innovation or entrepreneurship.”
The lender also warned that mainstream banks are constrained by regulations and a lack of understanding of the complexities of SMEs’ capital needs.
“They generally need to lend against secure assets and a simple business plan. Modern businesses – especially the innovators – can seldom tick all the boxes that banks need,” ThinCats said.
“But the expertise and the will to provide capital to UK SMEs exists in the form of alternative finance.”
Read more: ThinCats hits monthly lending high of £12m