3. Chamberlink June 57-76.qxp_Chamberlink 28/05/2021 10:23 Page 60
Sector Focus
Finance
Europe’s first sustainabilitylinked loans are launched
Richard Bearman: Help for entrepreneurs
Gen Y leads the way for start-ups Millennials are leading the way when it comes to starting new businesses in the West Midlands, according to a start-up funder. Start Up Loans – part of the British Business Bank – says that millennials (or generation ‘Y’) have taken up the majority of the loans it has issued in the nine years it has been operating (54 per cent). That is based on offering more than 2,500 loans to unemployed people in the West Midlands since 2012, with the total funds pledged topping £11.3m. Start Up Loans said it had continued to support would-be entrepreneurs during the coronavirus crisis, delivering more than £1.2m of funding in the region in the 12 months up to March of this year. Richard Bearman, managing director, Start Up Loans said: “Start Up Loans is uniquely positioned to drive the nation’s investment in creative, entrepreneurial talent of any age, thanks to our extensive network of delivery partners and support services. “As well as a loan, we support individuals with the practical steps they need to take to begin their own enterprise from writing business plans, accounting and marketing, as well as access to learning with partners such as The Open University. “It is paramount that we do everything to empower the next generation of young working talent, who have an important part to play in unlocking the UK’s economic recovery, by giving them every chance to succeed, whatever their circumstances. “Unemployment can have a catastrophic impact on an individual’s financial security, selfconfidence and ability to apply for finance from lenders, and the support provided by Start Up Loans can be of particular use to younger, less experienced business owners.” 60 CHAMBERLINK June 2021
of them had managed to put into Virgin Money has become the practice. first bank in Europe to link loans More than half (57 per cent) to business going green. said that cost made it difficult for The self-styled ‘new disruptive their business to be more force in UK banking’ says its sustainable. sustainability-linked loans (SLL) Graeme Sands, corporate and will reduce the cost of finance for mid-market director, Virgin Money those businesses whose core (pictured), said: “While businesses activities are helping the economy overwhelmingly recognise the become more environmentally importance of sustainability many, friendly. especially SMEs, struggle to The scheme was developed by translate good intentions into a Virgin Money in partnership with clear plan and are worried about Future-Fit Foundation, and is the cost and time involved in delivered through what is called implementing an ESG programme. an ‘environmental, social and “This is why we partnered with governance (ESG)’ assessment, which basically questions a ‘We firmly believe that Future-Fit Foundation, to help SMEs and other businesses business to find out how ‘green’ it we, and other banks, manage and measure sustainability. is. have a duty to direct “The benchmarking tool The FF Foundation is a charity enables us to identify those that wants to make the world capital responsibly’ businesses with capabilities that economy more environmentallyproactively drive other companies or consumers to friendly. create a more sustainable society and the loans will Virgin Money, which brings together Clydesdale help these companies grow faster and help relieve Bank, Yorkshire Bank and Virgin Money, says it is the some of the cost pressure. only bank outside the ‘Big 5’ that boasts a genuine “We firmly believe that we, and other banks, have full-service personal and business banking capability. a duty to direct capital responsibly.” Under the new loan initiative, any business that FF Foundation co-founder Martin Rich said: “Every wants to borrow at least £250,000 and has a business must play its part in solving today’s most ‘sufficiently strong’ ESG assessment, any loan pressing social and environmental challenges, not only provided by Virgin Money won’t incur an to ensure we transition our economy to operate within arrangement fee. planetary boundaries and to meet societal needs, but Virgin Money has committed that five per cent of also because it makes sound business sense. all its business loans will be to firms driving “Any organisation which fails to step up is at risk environmental and social change by September of losing its customers and potentially its licence to 2022. operate. Getting started can be daunting, not least To back up the initiative, Virgin has carried out a for SMEs, which is why we’re excited about our survey among the UK’s small to medium enterprises collaboration with Virgin Money, who share our vision (SMEs), to find out how sustainability is to them. not only to make a positive impact but to help others Virgin says the survey revealed that a massive 85 do the same.” per cent said it was important – but only 43 per cent
Borrowing falls as economy recovers UK firms are now expected to slash their borrowing this year – and it’s all down to the economy rebounding more quickly than expected. According to a new report into bank lending by EY’s ITEM Club, UK firms will want to borrow £19bn this year, down from an expected £26bn just last February. The reduction is due to less money being needed for recovery purposes. Banks lent businesses £35.5bn in net terms (including Covid-19related Government-backed loans) last year – an eight per cent yearon-year increase – primarily to help firms through the pandemic. With the economy re-opening, growth in lending volumes is set to
halve by the end of this year (to four per cent) and slow further in 2022 to 1.6 per cent, as businesses increasingly focus on repairing their balance sheets. These forecast figures are modelled on the Government’s strategy for easing pandemicrelated restrictions. The decrease in lending volumes has been accompanied by an upturn in consumer spending levels, to near pre-pandemic levels. Anna Anthony (pictured), UK Financial Services managing partner at EY, said: “Given how difficult the last 15 months have been for millions of families and businesses up and down the country, it’s encouraging that the economic recovery will be quicker and stronger than initially
forecast. That’s not to say though that there won’t continue to be challenges ahead. “For the banking sector, the lockdowns have had a unique and divergent impact on lending volumes. While many businesses borrowed more than normal just to survive and millions of consumers repaid record levels of personal debt and borrowed less, these patterns will likely be relatively short-lived. “The banks will continue to support businesses and households through the pandemic and beyond, but modest lending growth on some fronts combined with the ongoing very low interest rate environment means the pressures on profitability will remain front of mind for the sector for the foreseeable future.”
