Cash flow lending could help tackle the UK’s productivity puzzle

  • Unsecured lending could solve the financing problem for UK businesses caught in the “missing middle”
  • Helping these firms to grow will boost productivity across the economy

Today the latest ONS figures show that labour productivity for quarter two (Apr to June) 2019, as measured by output per hour, fell by 0.5% compared with the same quarter in the previous year, falling at the fastest rate in five years.  This follows two previous quarters of zero growth.

Both services and manufacturing saw a fall in labour productivity growth of 0.8% and 1.9% respectively, compared with the same quarter in the previous year.

Dominic Buch, managing partner and co-founder of SME credit specialist Caple, said: “Access to the right kind of finance is the key to solving productivity as that is what helps small firms become medium-sized businesses.  Unfortunately, too many small firms struggle to grow because the lack of suitable finance hampers their productivity.

“Micro businesses can access finance from peer-to-peer platforms.  Larger businesses, or those with assets, are well served by banks.  The significant issue is for growing businesses, the ‘missing middle’, which need to borrow between £500,000 and £5m and do not have assets to use as security.

“To tackle productivity, growing firms need lending that is fit for purpose.  Here, lenders should not focus on a business’s physical assets. Lenders must instead look at the future of an individual business and assess what cash flows it will generate.  Cash flow lending will help small firms become medium-sized businesses and boost productivity across the economy.”