Unsecured lending could help tackle the UK’s productivity puzzle

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

ONS figures show that labour productivity, as measured by output per hour, for quarter three (July to Sept) 2019 has risen by just 0.1% compared with the same quarter in 2018.  This follows four previous quarters of contraction.

Services saw a rise in labour productivity of 0.1% compared with the same quarter in the previous year.  In contrast, manufacturing saw a 1.9% decrease.

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. The data shows that growing smaller firms into medium-sized firms delivers the largest increases in productivity.  Unfortunately, too many small firms struggle to grow because they can’t access suitable finance, which hampers their productivity.

“To tackle productivity, growing firms need lending that is fit for purpose.  Very often that might mean additional unsecured funding that sits alongside traditional bank lending.

“Instead of focusing on a business’s physical assets, lenders must look at the future cash flows an individual business will generate.  Genuinely unsecured lending which is based on these future cash flows will help small firms become medium-sized businesses, boosting productivity across the economy.”