“The financial services sector is constantly innovating and there is a huge amount of work underway”: David Raw, UK Finance

“Lenders are open for business and ready to support businesses across the UK who need and can afford finance, whether that be for shorter term working capital or to deliver investment for future growth.”

FR: Tell us a bit about your current role and your career in the financial services industry.

As managing director of commercial finance at UK Finance, I am responsible for heading up the team that represents members who provide services and finance for businesses up and down the country. Our members range from the largest UK banks to smaller and specialist lenders, non-bank alternative lenders, and invoice finance and asset-based lenders. Our goal is to support the growth and success of businesses, particularly SMEs, focusing on key issues such as access to finance and responding to the ESG challenge.

I joined UK Finance in the second quarter of 2023, having previously worked at the FCA and HM Treasury. I was the FCA’s director of cross cutting policy and strategy. In this role I worked on areas including the response to the cost of living crisis, redress policy, the Future Regulatory Framework and the Consumer Duty. At HM Treasury I was deputy director for banking and credit, leading the department’s policy work on retail banking and SME lending. I led the team that developed and delivered the Covid-19 guarantee schemes for business lending, including over 1.5 million Bounce Back Loans, an incredible example of what can be achieved when industry and Government come together.

FR: What challenges persist for SMEs in the current financial climate and how can intermediaries best support them?

It’s a challenging economic climate for SMEs. Inflation has fallen, but it’s still higher than we’d want it to be, energy costs are still high and there is a tight labour market, which means firms are competing for staff.

Despite these challenges, as well as the impact of lending taken out during the pandemic and higher interest rates, creating affordability challenges for some SMEs, we are still seeing a healthy supply of lending to SMEs of over £5bn a month.

What we also observed over the past year was many SMEs returning to the longer run normal of being permanent non-borrowers, leaning more heavily on existing resources, particularly cash deposits, rather than seeking new finance.

Despite these challenges lenders are open for business and ready to support businesses across the UK who need and can afford finance, whether that be for shorter term working capital or to deliver investment for future growth.

FR: What new products or innovations are currently on offer in the financial services sector that commercial finance brokers should know about?

The financial services sector is constantly innovating, and there is a huge amount of work underway.

One very interesting area is the future of Open Finance and how unlocking additional datasets could help SMEs access credit. More generally, what is happening in the payments space is fascinating. Understandably most of the focus is on the consumer side but how businesses will expect to pay and get paid is going to change significantly in the years to come as well.

This is going to bring both challenges and opportunities for all those members that support businesses, not just those providing secured products such as invoice finance and asset-based lending, and we look forward to supporting our members with those. You can then lay the possibilities of AI and data extraction and analysis over that, and it is going to be a really exciting time.

There are other initiatives I’d like brokers, industry and the wider public to be aware of too. We have a guide for small businesses opening a business current account, as well as a Q&A for firms applying for finance. These resources can help firms navigate the broad and competitive commercial finance market.

FR: What would you like to see introduced from lenders, the government or trade bodies to support SMEs?

Small businesses are the engine of our economy. Looking ahead of the government’s Spring Budget, there are a number of measures we’d like to see introduced to support SMEs.

Ensuring high potential, early-stage companies can access the finance they need is vital to our economy. Banks and other finance providers have a great deal of capacity and will continue to support UK SMEs in accessing finance.

Despite this, UK investment rates remain below the OECD average – and this is definitely something we should all be focused on. One thing government and regulators could do is look at some of the capital requirements which inhibit bank lending.

Another factor critical to success for SMEs is access to support such as tax incentives and the outgoing Recovery Loan Scheme (RLS). It would be bad news for SMEs if the Government were to let the RLS expire without an alternative in place. That’s why we at UK Finance are proposing they replace it on the same terms with a Growth Loan Scheme, to support UK businesses as they seek to invest and grow. By offering small and medium enterprises the assurances they need through a growth loan scheme – they will be able to grow further and faster.

FR: If you could see one headline about the commercial finance market in 2024, what would it be?

We know UK businesses are fiercely resilient. Hopefully as inflation and interest rates fall and the demand outlook improves, we will see businesses thrive. We’ve got an election on the horizon and it’s good to see all political parties talking up the role of business and its role in the economy.

We in the financial services sector want to support firms of all shapes and sizes through business lending. So I suppose my headline would be – ‘Let UK Businesses Prosper’!

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