The Manchester Evening News interviewed our Chair - Ron Emerson CBE - on his views on the UK SMEs and local banking.
Banking veteran Ron Emerson has been changing the way money is lent to the SME sector.
As the former chair of the British Business Bank, the UK government’s economic development bank aimed at improving access to finance, he helped to mobilise around £7bn of new money for the SME sector and funded more than 40,000 new start-ups in the three years that he was at the helm.
In September, Emerson was appointed the chair of B North, the Manchester-based firm building an SME lending bank for the UK.
B-North is currently in the process of gaining a banking licence and recently announced funding from the Greater Manchester Combined Authority (GMCA) to help Manchester businesses access much needed debt capital quickly and effectively.
Emerson, who has also held roles as a senior banking adviser at the Bank of England, as well as 20 years as a member of the Faculty of Management Studies at Oxford University, says more work is still needed to be done to help SMEs access finance and scale.
And he also believes there are lessons to be learned from the 19th and early 20th century where regional regeneration was led by entrepreneurs working closely with their local banks.
Pointing to research being carried out by fellow Oxford University Professor, Colin Mayer, on Rebuilding Macroeconomics, he said: “Financial services was a key resource for regeneration because banks were set up locally and the financial networks underpinned the growth of its towns and cities.
“But they have all disappeared as the government centralised everything.
“Britain is unique in this. Germany didn’t do that, the US didn’t do that, yet we centralised everything.
"We need to look more closely at how local banks can help the local economy.”
Currently, there are 5.9m SMEs in the UK generating around 60% of all employment.
SMEs play a key role in economic growth, job creation, regional and local development and social cohesion.
Yet challenges still remain when it comes to accessing finance to scale a healthy business.
“I think that’s one of the reasons why B-North is an idea of its times,” says Emerson.
B-North plans to open a national network of small business-only banks across England by the end of 2020.
The start-up bank, which has raised £4.5m in seed funding so far, plans to offer small business loans of anything between £500,000 up to £5m when it opens its doors.
Manchester will be the first B-North office (or “lending pod”) to open next year, followed by offices opening in Yorkshire, the Midlands and London in stage one.
B-North has identified another four locations for stage two.
The lender, which is in the process of getting a banking license, believes there is a gap in the market for an SME lender offering loans higher than the almost-instant debt offered by fintechs and peer-to-peer lenders, while offering faster lending decisions than incumbent high-street banks.
Laying out his passion for SMEs and a backdrop to B-North, Emerson says: “I have a passion for SMEs. We all know SMEs have been the major driver of job growth in the last decade, and I think it’s going to be the critical piece of the UK economy going forward and there are various reasons for this.
“Firstly, if you look at young people they don’t want to work with big corporations anymore, whether it’s because they don’t trust them or they do not reflect their values. More young people are choosing to set up their own businesses or want to work for a small business where they can sit next to the boss and he or she isn’t on the tenth floor on the other side of the world.
“Becoming an entrepreneur is seen as aspirational and so we’re seeing a demographic shift of interest in people coming up to the world of work.
“SMEs also provide a more stable form for the economy. We all think big companies are doing this, but if you get a giant like Nissan or Honda pull out of a town, the economy disappears.
“With SMEs, you get lots of them so even if you lose a few it still works, the heart of a town isn’t pulled out."