2 months ago
For SMEs in the UK, the British Business Bank (BBB) has long been a reliable source of support. However, recent headlines are painting a different picture, with the BBB reporting an annual loss of over £147 million.
The British Business Bank is a Government-owned institution set up in 2014 to support and promote economic growth by providing financial support to SMEs. Despite being 100% public-owned, the BBB operates independently.
The bank provides access to finance for smaller businesses by working with banks, venture capital firms and lending platforms to facilitate loans and investment. It also manages financial risks associated with loans by offering guarantees to lenders to encourage them to lend to SMEs in riskier sectors.
The Sheffield-based BBB often works in partnership with local and regional business organisations to provide a broad range of support services to SMEs, including mentoring, advice and networking. The body was instrumental in implementing schemes like the Enterprise Finance Guarantee (EFG) and the Future Fund that supported businesses throughout the COVID-19 pandemic.
Over the last decade, the British Business Bank has made great progress, with funding agreements totalling an impressive £1.6 billion in the previous financial year. This progress makes the recent revelation of a £147 million pre-tax loss all the more shocking.
The bank's investments in business saw a 5% decrease, amounting to £146 million, in the 12 months leading up to March 2023, a stark contrast to the £619 million increase the previous year.
Some have suggested that the BBB's struggle may not be an isolated incident but part of a broader trend. The valuations of technology businesses have been volatile for a long time, with investors growing increasingly cautious due to lending difficulties and slow returns.
Despite these challenges, the BBB has made a considerable difference for SMEs in the UK. Its funding now stands at a staggering £12.4 billion, benefitting over 90,000 businesses.
The controversial investment of taxpayer money in some businesses, ranging from the unusual to the downright bizarre, has been heavily criticised. Along with a craft brewery, airship manufacturer, CBD oil producer and bookmaker was significant funding for a League One football club and a sex party organiser.
Football Ventures, owner of Bolton Wanderers Football Club, was one of 108 businesses to receive an emergency loan during the pandemic. The group opted to convert the £5m sum into shares, leaving the British taxpayer with a sizeable stake in the fortunes of the Super Whites.
Emma Sayle, founder of Killing Kittens, received over £1m in funding from the British Business Bank in 2020. The taxpayer now holds a 1.5% stake in the adult event planner, which claims to have over 180,000 customers between the UK and the US.
What does all of this mean for SMEs? While the British Business Bank's recent losses may raise concerns, viewing it within the broader context is vital. Economic downturns and fluctuations are part and parcel of the financial world, and the bank's long-term vision remains optimistic.
For businesses navigating these challenging times, it's essential to be resilient, adapting to changing circumstances and seeking support where available. The BBB is still a valuable resource committed to supporting SMEs.
CEO Louis Taylor played down the magnitude of the situation: "Given the longer-term 10 year horizon for most of our investments, we would expect an overall upward trajectory despite these in-year fluctuations."
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