The CBI is urging the next government to help unleash new long-term capital to support dynamic medium-sized businesses that will create new jobs and boost growth.
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.
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 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.
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.
“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.
“The report also highlights that the majority of the £466 billion investment needed by 2020 to keep UK infrastructure up-to-date needs to come from the private sector. But investors are being held back by uncertainty over the future pipeline of projects.
“It’s time for, the government to establish an independent infrastructure body to determine future investment needs and look at innovative solutions, like ‘bundling’ smaller projects together, to create an attractive proposition for institutional investors.”