• For Scotland, ‘enhanced’ growth would mean an additional 10,000 jobs, 9.1% increase in turnover and an additional £1.4bn for the local economy


Improving competition in the Small and Medium-Sized Enterprise (SME) banking market and supporting small businesses to better access competitive credit products could deliver 157,000 extra jobs and add £23 billion1 annually to the UK economy by 2023. This is the conclusion of a new report by economic research consultancy Development Economics2 commissioned by Santander UK.


The report considers two alternative scenarios for the future economic contributions of SMEs in the UK: no change to the current environment and an ‘Enhanced SME Growth’ scenario, which looks at the impact more nationwide-competition in the sector could have on business growth and the wider economy.


Under the ‘Enhanced SME Growth’ scenario, the report concludes, there would be a significant rebalancing of UK growth, particularly in employment, from the South East to the UK regions; for example, an additional 10,000 jobs created in Scotland by 2023. The UK economy outside of the South East also performs proportionately better, shifting growth in favour of the English regions, Scotland, Wales and Northern Ireland. In total, SME employment would be expected to reach 16.98 million, an increase of 839,000 jobs - this equates to 157,000 more than would be expected under the ‘no change’ scenario.


Luke Graham MP, member of Parliament for Ochil and South Perthshire said:

“It’s clear from Santander’s SME Growth report the huge potential for Scottish SMEs if they had the access to finance and banking services that many companies in London and Manchester currently take for granted. With funding from the Alternative Remedies, there is an opportunity to bring this kind of offering to our Scottish SMEs.”


Santander promotes the growth of SMEs through the provision of banking services and provides access to credit to help businesses invest to grow and manage their cash flows. Its support, however, goes beyond the provision of bank accounts and credit to include expertise and advice on business growth. Its nationwide network of relationship managers means that it understands the needs of its customers. Its Breakthrough programme includes assistance with issues such as access to talent, building business networks to allow SMEs to learn from each other’s experience, and supporting first time exporters.”


Sue Douthwaite, Managing Director, Santander Business, said:

“SMEs are currently responsible for generating around 43% of national economic output and they could contribute even more. We know that growth-orientated SMEs are constrained in achieving their potential through limited access to credit and other forms of support. There is also evidence that an increasing proportion of SMEs are reluctant to borrow and would rather grow more slowly than take on lending. If just a small portion of these business had access to new products and relationship management support from their banks, the impact on SME growth rates and jobs would be significant.”


The report also shows that annual output attributable to UK SMEs would be expected to grow by about £89.7 billion per annum in real terms by 2023, to just under £781 billion. This is an increase of 13% in real terms compared to the 2017 position and compares to an increase of £66.7 billion by 2023 predicted under a ‘no change’ scenario - a stark difference of £23 billion.


The report warns, however, that SMEs face a series of growth constraints, including access to and appetite for credit to fuel growth. An increasing proportion of UK SMEs can also be regarded as ‘permanent non-borrowers’, meaning that a large number would rather grow more slowly, than borrow to invest to grow more quickly.  In addition, diminished trust and confidence among SMEs in banks could be mitigated if the SME banking market was subject to more competition, with a more even distribution of business banking services to support the growth of small businesses across the UK rather than just in metropolitan centres.


A survey3 of 1,200 UK SME business owners and decision makers commissioned to support the report found that around one-third (34%) of SMEs would like their bank to offer more help to enable them to grow quicker. Among those SMEs who anticipate growing significantly in the next 12 months, more than a third (37%) said that their bank had been unable to provide the help they needed to grow quickly, while 23% said that their business’ bank had been able to help “a little”.


Sue Douthwaite added:

“Santander has developed a presence in every country of the UK and we believe we offer the network, product suite and service focus that can provide the competitive boost the UK SME sector needs. We deliver banking services to over fourteen million people in the UK and are an ambitious challenger in the business banking market. This means that we are committed to supporting the growth of SMEs so they can provide new employment opportunities to boost household incomes in all areas of the UK.”