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The changing finance landscape for SMEs in the North

With renewed debate on the spatial re-balancing of the UK economy, how should we address the North-South divide?

Article written by Stephen Waud, Chief Executive, BEF 
Originally published in Commercial Broker (NACFB Magazine) June 2019

The North of England – wilfully determined, entrepreneurial progressive – where there’s muck there’s brass. Known for its rolling hills, its rugged, desolate moorlands and breath-taking scenery. Sadly, the financial landscape for SMEs does not quite mirror the real thing. A recent Financial Times article bemoaned the huge funding gap that exists between equity investment in the South East and the North. The article stated that: ‘Companies in London and the south-east receive 75 per cent of all private equity investment in the UK.’1

It has long been the case that those businesses wishing to develop the next stage in their growth plans have often had to chart a course south to woo and schmooze savvy city investors. Of course, there are fund managers and investors in the North, but we can’t avoid the fact that there are just more of them, and a greater availability of capital, south of the Watford Gap.

When it comes to conventional debt finance for SMEs it’s more equitable. But the truth is that since 2008 and the financial crash, SMEs who are in their first blush of youth (two years and under) still fail to get all the finance they need. A recent survey by SME funding platform Code Investing showed that only 8% of SMEs who apply to the banks get their loans.2 Ten years on, can we really say this is progress?

Thankfully, there is a little light at the end of the tunnel because the void created by the southern equity gap has been partly filled by the onset of new, alternative lenders. Business Enterprise Fund are one such fund based in the North of England, supporting new and early stage SMEs with critical lines of credit. Further to that, there is more positive news with the establishment of the Northern Powerhouse Investment Fund (NPIF) which provides £400m of investment for SMEs.

Setup by the British Business Bank, the Northern Powerhouse Investment Fund covers the North West, Yorkshire, the Humber and Tees Valley. Within the fund there is both debt and equity finance to cover the needs of start-ups and larger SMEs. Similar funds have been established in the North East with the launch of the North East Fund (NEF) and the Midlands with the launch of the Midlands Engine Investment Fund (MEIF). Indeed, Barclays have weighed in with their own version of the Northern Powerhouse Investment Fund which is set at £500m.

Alternative funders such as Business Enterprise Fund, Funding Circle, and Thincats (there are other alternative funders available) have seen the market for their products grow significantly over the last few years and now it constitutes well over 10% of all SME lending in the UK.

So, despite the challenges faced by the constant North-South divide, we can show that canny business folk in the North are still rising above the challenges within the difficult funding landscape and are creating and providing a vibrant economic landscape.

1. Financial Times. 2019. London and south-east secure bulk of private equity investment. Available at:

2. SME Magazine. 2018. High street bank converts just 8% of SME loan applications. Available at:

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