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Breedon: the Recommendations

by Michael Izza on 16.03.2012 02:00

Today the Breedon Report, which proposes alternatives to bank finance for UK businesses, was launched at Chartered Accountants’ Hall.

 

With 55% of small businesses resorting to credit cards to finance themselves, and government estimates that the finance gap could be between £84bn to £191bn over the next 5 years, action to improve access to finance can’t come a moment too soon. Putting a finance gap into print gives a powerful incentive for Government to make changes, and the report provides some interesting ways to address it in the long term.

 

One of the key recommendations in this report is to create a Business Finance Advice Scheme. The scheme will build on the ICAEW’s current SME Funding Adviser scheme providing a government recognised logo to those firms which met the required criteria. ICAEW will be one of several organisations supporting the Business Finance Advice Scheme.

 

Perhaps the other key recommendation is to improve the communication of Government support programmes through the creation of a single brand for its interventions. This and the consolidation of delivery of programmes into a single delivery agency should increase businesses familiarity with the vast array of schemes available to them.

 

The other proposals are largely designed to help business finance through

 

1)         Exploring ways businesses can tap the Corporate Bond markets and encourage more retail demand for them (for example through tax breaks);

2)         Increasing the number of UK based Private Placement investors through an industry initiative led by the Association of Corporate Treasurers;

3)         Passing on the benefits of Government’s prompt payments to company suppliers, and exploring ways to encourage faster payments by large companies ;

4)         Using the Government’s power as biggest purchaser in the UK to encourage its own suppliers to adopt supply chain finance; and

5)         Working with banks, industry associations and professional bodies, such as the ICAEW, to accelerate the adoption of Supply Chain Finance.

 

Breedon recommends Government should look at the impact of international regulation on bank and non-bank finance yearly, and set up a new industry led task force to make proposals on how to remove barriers on bank lending to support SME trade finance.

 

The report also suggests looking at new finance products, and to this end recommends the BBA sharing data with non-bank providers, and other data sharing to help kick start new finance products and markets.

 

On the same note, it asks that the government consider the potential for the Business Finance Partnership to make commercially attractive investments in Online Receivables Exchanges, Mezzanine Loan Funds, and P2P lending platforms. Development of these, with appropriate regulation, could be helpful in increasing the supply of non-bank sources of finance, but should perhaps best be carried out free of Government investment and intervention.

 

While it does not cover equity finance, typically used by high growth and family companies, it’s a fairly impressive report for a 3-month turnaround.

 

Good access to finance is an issue of major national importance because getting this right is vital to economic recovery in this country.

 

ICAEW will be delighted to work with Government to put these recommendations into practice.