Member Article

Brexit to hit North East harder than any other region in accessing finance, finds report

Small firms across the North East are set to be worst affected by any Brexit-related disruption to small business finance markets, according to the latest Federation of Small businesses (FSB) report.

Take-up of British Business Bank (BBB) and European Regional Development Fund (ERDF) backed finance schemes for small firms is higher across the North East than any other part of England. Small firms in the North East have benefitted to the tune of £5,660 on average from such initiatives, compared to an average of £2,420 across the country.

Seven in ten (69%) small business equity deals in the North East involve public investors, many of which are backed by EU funds. The figure is higher than any other region of the UK. FSB is calling on the new Government to support local venture capital activity in the North East, which has to date relied on a significant proportion of European funding.

FSB’s new ‘Reformed Business Funding: What small firms want from Brexit’ report finds that small businesses across the North East are among the most likely to apply for EU-funded schemes, with the proportion of applicants across the region (22%) significantly higher than the average for the UK as a whole (15%). More than two thirds (68%) of firms in the North East state that access to finance should be a priority for any EU funding replacement.

FSB is calling on the new Government to ready the British Business Bank (BBB) to replicate the current role of EU funds in supporting small business finance markets following Brexit. Under FSB’s new proposals, the BBB would receive extra resources to promote access to finance for small firms, helping to support regional economic growth across the UK.

EU funds have backed several finance schemes across the North East, including the £159.5 million North East Finance initiative and the £145 million North East Fund.

Martin McTague, FSB National Policy Director, said: “EU investment in UK finance markets has served as a vital lifeline for small firms across the North East.

“If the new Government is serious about developing an Industrial Strategy that supports growth across all regions, it must stand ready to expand the British Business Bank post-Brexit.

“Failure to do so will massively hamper the ability of small firms to invest and grow, threatening an economic slowdown across the region as a whole.”