British Business Investments, the commercial arm of the British Business Bank, reported a nine per cent rise in the number of small- and medium-sized businesses it is supporting across the UK, but said the coronavirus pandemic has had a “devastating impact” across the sector.
The state-backed lender said it is now supporting more than 37,000 small- and medium-sized enterprises across the UK and provided access to £547m worth of funding in the year to 31 March 2020. This was a 26 per cent rise year-on-year and takes the total funds provided to £2.5bn.
However, the lender has been hit by the Covid-19 pandemic, which affected its fourth-quarter performance and caused overall profit to fall. It delivered a pre-tax profit of £22m for 2019/20, down from £82m the year before and £71m in the previous financial year. Prior to the pandemic, it had been on track to hit annual financial targets for 2019/20.
British Business Investments said it has a strong relationship with more traditional sectors of the economy and therefore a greater exposure to the coronavirus pandemic’s impact.
“The Covid-19 pandemic has had a devastating impact across society and the economy. The UK’s small and medium-sized businesses have been particularly hard hit, with many businesses suffering significant losses in revenue, and disruption to their cashflow,” said Francis Small, chair of British Business Investments.
British Business Investments, which launched in 2014 and is backed by the government, invests through alternative finance providers including peer-to-peer lending platforms. Its aim is to increase the overall supply and diversity of finance on offer to the UK’s smaller businesses, while providing value for the taxpayer at the same time.
It does not finance small businesses directly, but works with the wider lending market to provide funding through its delivery partners. These include P2P lenders Assetz and Funding Circle.
In its sixth annual report, British Business Investments said it had taken on nine new delivery partners in the year to the end of March. It has a total of 59 portfolio investments, delivered through 49 funding partners, after taking on a further 15 in 2019/20.
“We are pleased to report strong growth during 2019/20 and a record year in terms of new commitments and diversification of our portfolio,” said Judith Hartley, chief executive of British Business Investments. “This has enabled us to broaden our reach across alternative finance markets and extend the support we provide to growing businesses outside of London and the South East.”
The pandemic is likely to affect its performance in the 2020/21 financial year, as continuing economic uncertainty means the long-term impact on its investment valuations and credit losses is not yet fully discernible and the final impact on its portfolio “will only be understood over time”.
“Our actions have included extending commitment periods, amending or waiving financial covenants to provide greater flexibility for delivery partners to support businesses and becoming a cornerstone investor in fund and capital raises where investor appetite was subdued,” Hartley added.
“We have also amended contracts so that our delivery partners could offer Coronavirus Business Interruption Loans, as this was one of the UK government’s key economic response measures to the pandemic.”