A new report published by ThinCats, a UK’s leading alternative finance provider to mid-sized SMEs, shows how borrowing and private equity investment drives growth for mid-sized businesses.
Using data from over 200,000 mid-sized firms since 2007, ThinCats’ Growth Lens provides insights into level of growth of UK mid-sized SMEs companies. The analysis also highlights which sectors and regions are performing best post-COVID.
The key findings show:
- Nearly 40% of mid-market SMEs have achieved revenue growth of at least 5% above inflation
- Companies borrowing are two-times more likely to achieve strong growth of 25% above inflation and three-times to have super growth (50% above inflation)
- Combining borrowings with private equity investment shows the strongest growth potential. Such companies are twice as likely to achieve strong growth (25% above inflation) and four times more likely to achieve super growth (50% above inflation) than non-borrowers
- Companies which borrow are 39 times more likely to achieve growth (5% above inflation) than go insolvent
The proportion of companies growing during 2007-2019 was strongest within finance and IT-related sectors, recruitment and employment agencies. However, post-COVID, all the top 10 strongest sector contributors to growth have seen significant declines within sectors like social sciences, financial services and pharmaceuticals. Post-COVID, discretionary spend businesses such as travel agencies, automotive, hotels and restaurants all move into the top 20. The healthcare sector, covering private residential nursing homes and hospitals, also moved into the top 20 growth sectors.
Regionally, pre-COVID, parts of the North represented a greater proportion of growth businesses compared to other regions: eight of the highest-growth postcode areas were located in the North versus two in Greater London. However, post-COVID, London has reasserted its dominance with six of the top 20 growth postcodes in Greater London.
ThinCats’ Growth Lens comes alongside recent findings from the British Business Bank which highlighted a lack of lending and investment among smaller businesses. In March, the Department for Business and Trade launched a call for evidence to assess the debt finance market among small businesses.
Ravi Anand, Managing Director, ThinCats said: “ThinCats Growth Lens demonstrates the huge leaps that companies can make by taking on external finance. Accessing debt or private equity can unlock productivity gains, allow investment in talent and operations and fund strategic acquisitions. With the potential to quadruple the odds of achieving growth 50% above inflation, it’s a strategy that ambitious businesses should be considering.
“The government is looking at the small business finance market as a key part of the bigger picture of how we get growth in the economy. Seventy-five percent of lending to UK mid-sized businesses is through with the top five UK banks. We need clear government action to break the banks stranglehold on a key engine of economic growth.”
