High Growth Businesses Struggle to Access Finance

High growth businesses can be found right across the UK, but those outside London can find it more difficult to access finance, new research by think tank IPPR has found.

High growth businesses are those with more than ten employees attaining an employee or turnover growth rate of 20% over a period of three years.

The report finds that:

- High-growth businesses, of which there are more than 12,000, are found in all sectors and all regions of the country: in fact, the North East has the highest proportion of high-growth enterprises of all regions, relative to the total number of businesses;

- However, the supply of finance, particularly equity, is extremely regionally imbalanced: the share of equity finance going to businesses in London is more than twice as high as London’s share of high-growth businesses;

- Businesses with growth ambitions are more likely to have their applications for bank lending rejected, and are more likely to be discouraged from applying for loans in the first place, due to the extra perceived risk they face;

- The Government’s Enterprise Investment Scheme and Seed Enterprise Investment Scheme cost £565 million in income tax and capital gains tax relief. The reliefs overwhelmingly benefit businesses in London, which account for just 18% of the business population and 21% of the UK’s high-growth enterprises, yet received 46% of these reliefs.

IPPR is calling on the Government to:

- Give the British Business Bank a specific objective of supporting businesses outside of London to kick start the work of small, high growth firms across the country;

- Review the Enterprise Investment Scheme and Seed Enterprise Investment Scheme to make sure small high growth businesses outside of London, which find it hardest to get finance, benefit.

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