In DevelopmentAid’s series of articles on development finance institutions, so far we have looked at those that focus on supporting private businesses in developing and poorer countries. However, the range of work undertaken by development banks is much wider with multiple governmental financial organizations supporting small businesses within developed nations themselves. In today’s article, we focus on the British Business Bank which aims to secure sustainable growth for smaller businesses in the UK to enable the transition to a net zero economy.
Founded by the UK government in 2014 with the main goal of improving the efficiency of the financial markets for Small and Medium Enterprises (SMEs), which are an essential part of the British economy, the British Business Bank has since expanded steadily, offering Start Up Loans, the Bounce Back Loan Scheme, the Recovery Loan Scheme, and Pay As You Grow solutions to help smaller firms to expand and grow.
British Business Bank’s main functions and impact
Despite being entirely controlled by the Department of Business and Trade, the British Business Bank (BBB) is independent in terms of its activities.
🔹 Access to funding for SMEs
The services offered by the BBB are essential in helping SMEs to gain access to financing. The bank provides funding to businesses through its partners which include banks, leasing firms, venture capital funds, and web-based platforms. This strategy plays a key role in closing the gaps in the market particularly for SMEs that encounter difficulty obtaining capital from conventional sources.
🔹 Providing financial products
The organization provides a variety of financial products such as guarantees, equity, and loans and offers a range of financial options to meet the needs of businesses at different phases of their development.
🔹 Boosting development and innovation
The BBB seeks to advance economic development in the UK by encouraging innovation and business growth. This emphasis on innovation is especially important in terms of increasing the competitiveness of UK businesses in the international market.
🔹 Addressing economic difficulties
The bank plays a key role in how the UK government responds to economic difficulties. For example, it oversaw a number of government loan schemes during the COVID-19 pandemic which provided assistance to businesses that were impacted by the crisis.
The British Business Bank’s performance data
At the end of March 2023, the Bank had provided a total of £12.4 billion through its core financial programs and had given support to over 90,000 businesses with deployed £1.27 billion being deployed outside London. Ninety-nine percent of this came from sources other than the ‘Big Five’ banks – HSBC, Barclays, Lloyds Banking Group, NatWest Group and Spanish-owned Santander UK.
Source: British Business Bank, Annual Report and Accounts 2023
Summary of profit and loss for 2022 and 2023 in British pounds
Source: British Business Bank, Annual Report and Accounts 2023
The British Business Bank’s programs
During 2022–2023, a record £868 million was committed through the bank’s ENABLE Build and ENABLE Guarantee programs.
New commitments of £55 million were made to the bank’s Regional Angels initiative which helps to reduce regional disparities in smaller businesses’ access to seed and early-stage equity financing throughout the country.
The bank made a total of 100,000 loans through its Start Up Loans program which continues to empower entrepreneurs by removing the financial hurdles that many small business owners experience.
Start Up Loans Program
The Start Up Loans Company, a division of the BBB, administers the Start Up Loans initiative which is financed by the Department for Business and Trade and seeks to promote entrepreneurship in the UK, accelerate the pace at which new businesses are established, and improve their chances of survival.
The program provides free guidance and assistance together with loans (ranging from £500 to £25,000, at 6% interest) to those who are launching their first business or those who have been running their own business for less than three years.
The ENABLE Guarantee program
Through this program, the BBB helps to facilitate increased financing to smaller enterprises by banks and non-bank financial organizations, develops solutions across a broad spectrum of financing products and collaborates with every lender that meets its eligibility criteria.
This initiative is available to all UK banks as well as branches of non-domestic banks that work within the UK, and several other types of lenders that lend or plan to lend to SMEs that are financially viable and operate within the UK.
The British Business Bank sustainability reporting
The bank is a member of the Partnership for Carbon Accounting Financials and is also an active member of the UK Chapter’s Business Loans and Unlisted Equity Working Group.
The BBB is actively involved in the Mobilising SMEs for Climate Action project which, under the direction of Bankers for Net Zero, is creating workable solutions to help more than six million SMEs in the country to make the transition by drawing together banks, accounting professionals, energy businesses, civil society, and SMEs.
In addition to working to establish a more environmentally friendly financial ecosystem in the UK, through its network of over 200 delivery partners the BBB plays an essential role in financing sustainable technologies and helping smaller firms to adopt these.
The British Business Bank and the Sustainable Development Goals (SDGs)
A number of important Sustainable Development Goals (SDGs) are supported by the BBB’s various initiatives and investments, including the goals that target partnerships, economic growth, innovation, decreasing inequality, sustainable communities, and climate action.
Supporting SMEs is the BBB’s primary goal which involves its support of full and productive employment, decent work for everybody, and consistent, inclusive, and sustainable economic growth. The bank helps SMEs to grow and generate jobs by giving them access to financing – an essential facet of economic development.
The BBB helps to create a resilient infrastructure, stimulates equity, and fosters innovation through its emphasis on supporting innovation and by offering finance to companies in various industries including technology and infrastructure.
The BBB contributes to SDG13 through investments that drive sustainable economic growth. For instance, on November 23, the bank announced the launch of a £130 million Investment Fund for Wales which will make more money available to support the growth and success of smaller companies. By assisting companies throughout Wales, the fund will promote long-term, sustainable economic growth.
The importance of partnerships in attaining the SDGs is demonstrated by the BBB’s model that involves working with partners including banks, venture capital funds, and other financial institutions.
