SME Finance and innovation

Commissioned by the London Development Agency

The purpose of this study was to establish the type, size and scope of funding needed by London's SMEs and particularly the scale and type of provision required to assist those SMEs having difficulties accessing finance. As well as assessing the demand for finance and evidence of market failures, the study focused on the experiences of the various venture capital and loan schemes that had been funded under the 2000-06 ERDF London programme and considered the case for extending or changing these schemes for the 2007-13 ERDF programme. 

On the demand side, the research involved an analysis of the data in the London Annual Business Survey relating to; problems in accessing finance, consultations with a sample of businesses experiencing difficulties in accessing finance, and consultations with other stakeholders such as accountants and enterprise agency managers.  On the supply side, interviews were held with venture capital loan fund managers, venture capital organisations, bankers, and CDFIs. The study concludes with estimating the amount and types of funding needed to satisfy SME needs up to 2015, and considers various options for implementation.

 Please contact CEEDR for details on this project

Client - Department of Business, Energy & Industrial Strategy/Innovate UK

This study identified firms that had received support for innovation through twenty-five government programmes since 2004. It examined the effect of these programmes on these firms’ performance, looking at their long-term sales turnover growth, employment growth, innovation and survival. The most advanced counterfactual impact evaluation methods were deployed using government administrative datasets. Outcomes were compared against matching control groups so as to isolate the programmes’ impact. Middlesex University’s contribution to the study was an examination of knowledge-spillover effects and was led by Dr James Derbyshire.

Client - Department for Business Innovation and Skills and reporting to the British Business Bank

This early assessment of the UK government's £100m Angel Co-investment Funds (ACF) was undertaken in 2014 in partnership with Professor Colin Mason of Glasgow University, a leading international expert in business angel finance. The scheme which, launched in 2011, aims to fill an equity funding gap at between £200k and £2m in the UK seed and early stage SME funding market, providing angel syndicates with matching 'stretch funding' of up to 50%, whilst also raising the standard of angle investing. The project involved qualitative survey work with 19 successful and unsuccessful business angel applicants and 20 assisted and unassisted businesses. Overall, our findings suggest that the scheme is effectively filling an equity financing gap, well supported in the market and not duplicating any alternative public or private funding, but it is too early to tell whether it is raising the standards of business angel investment.

Contact CEEDR for details of this project

Commissioned by the London Borough of Barnet

This research investigated the baseline analysis of the Barnet economy from an enterprise perspective, providing evidence of the trends, key drivers and major barriers to business growth.

Building on evidence from the Barnet Economic Insight (2011), data was updated to provide the most current assessment of the borough's business dynamics and comparison with Greater London and neighbouring local authorities in two sub regions, focusing on two sub-regions with the potential for local economic partnership working and assisting the future growth of Barnet's economy:

(i) North London Strategic Alliance: Barnet, Waltham Forest, Haringey, Enfield and Redbridge.
(ii) The A5/A406 growth corridor: Brent and Harrow London boroughs and the Hertfordshire local authorities of Dacorum, Hertsmere and Watford.
The research also involved SME case study and supply-side business support interviews with a focus on key business sectors/clusters revealed by ward level growth trend analysis and provided clear guidance and insight to Barnet Council into the future business support requirements of these key growth sectors.

Contact CEEDR for more details on this project.

Commissioned by the London Development Agency 

CEEDR undertook detailed analysis of the London Annual Business Survey to examine the demand for and experience of accessing business finance in the London Region, as well as UK-wide literature review work on business finance programmes and case studies of businesses receiving equity finance from the London Technology Fund, as part of a larger review project in conjunction with Roger Tym & Partners.

Commissioned for the Department for Business, Innovation and Skills

A CATI telephone survey of the owner-managers of 1,200 employer SME (1-249 employees) businesses in England was undertaken in March 2011. The survey was mainly quantitative, collecting additional qualitative information for unspecified categories and took on average 20 minutes to complete. The survey sample was designed to provide statistically robust evidence of recent business use and non use of external business support services, differentiating between private sector and public sector sources of information and advice.

Date published: July 2011

Download full report

CEEDR, Middlesex University & ISBE, June 2017 Conference

SME Finance 10 years after the Global Financial Crisis

The Centre for Enterprise and Economic Development Research (CEEDR) and Institute for Small Business and Entrepreneurship conference at Middlesex University Business School on Tuesday 20th June brought together leading SME finance academics, policymakers including the British Business Bank and UK Department for Business, Energy and Industrial Strategy, and practitioners to discuss the dynamic evolving SME finance landscape in Europe and the UK. Parallels between the Global Financial Crisis and the current economic and political uncertainties around Brexit and UK coalition government were made.

Key themes emerging from the presentations and lively debate included:

• The emergence of new alternative forms of finance such as Crowd Funding and Blockchain and questions around how these might further develop.
• The need for a more holistic ecosystem approach to innovative business finance to ensure that commercialisation takes place and businesses reach their optimal potential for both the local/national economy and investors.
• The need to address the continuing problems of demand-side failure, including better investment readiness support to reduces access to finance failure and borrower discouragement.
• The increasing importance of social and green finance and that more patient capital is required for longer investment horizon ventures.
• The need for State Investment Bank type oversight of the developing finance escalator and financial ecosystem.

Next steps – the conference forms part of the new ISBE SME Finance Community of Interest Group and will springboard other conference and seminar events across Europe and a special issue of the International Journal of Entrepreneurship and Innovation.

For further information please contact:

Dr Robyn Owen, Associate Professor of Entrepreneurial Finance, CEEDR [email protected] or [email protected] and or Dr. Ciarán Mac an Bhaird, ISBE Trustee and Lecturer of Economics and Finance at Fiontar (Enterprise), Dublin City University, [email protected]

SME Finance, 10 years after the Global Financial Crisis Conference
Middlesex University and ISBE One Day conference.
Tuesday, 20th June 2017
09:30 - 17:00

Committee Rm 1
Hendon Town Hall, Middlesex University,
The Burroughs, London. NW4 4BT

PROGRAMME

09:30am  - Coffee and registration

10:00am  - Middlesex University welcome

10:05am  - 'Financing the scale-up of entrepreneurial businesses: beyond the funding escalator'
Professor Colin Mason (Glasgow University)

10.30am - 'The changing landscape for equity finance in the UK and current issues affecting the availability of funding to high growth potential businesses'
Daniel van der Schans (British Business Bank)

10.55am  - 'Crowdfunding Platforms as Super-Catalysts in an Entrepreneurial Ecosystem'
Professor Othmar Lehner (University of Upper Austria)

11.20am  - Initial Discussion

11.35am  - Coffee Break

SESSION 1: BARRIERS TO SME FINANCE

11.50am - 'Which UK SMEs apply, receive or are discouraged from accessing external finance? The implications for SME growth policy.'
Robyn Owen (Middlesex University) Tiago Botelho (University of East Anglia) & Osman Anwar (SQW)

12.10pm  - 'Financial literacy, access to finance and the growth of Small and Medium size Enterprises: An analysis of Enterprises in the UK'
Professor Javed Hussain (Birmingham City University)

12.30pm  - 'Performance and default: 7 years of peer to peer lending in the UK'
Ciaran Mac an Bhaird, Pierangelo Rosati and Theo Lynn (Dublin City University)

12.50pm  - Round table discussion

1.05pm  - Lunch

SESSION 2: ALTERNATIVE SME FINANCE

2.00pm  - 'Exploring the difference in performance between European and US venture capital funds'
Keith Arundale (University of Glasgow)

2.20pm  - 'How trust influences the development path of equity crowdfunding platforms: an exploratory study of AngelCrunch in China'
Li Xiao, (Lancaster University) Robyn Owen (Middlesex University)

2.40pm  - 'A Theory of Social Change in Crowdfunding Campaigns: A Critical Feminist Approach'
Theresia Harrer (University of Upper Austria)

3.00pm  - 'Is crowdfunding the new junior junior market?'
Tom Britton (SyndicateRoom)

3.20pm  - Round table discussion

3.35pm  - Coffee break

SESSION 3: GREEN FINANCE

3.45pm  - 'The Sustainability Technology Fund'
Beverley Gower-Jones (Carbon Limiting Technologies)

4.05pm  - 'A Review of Early Stage Investing into Sustainable Green SMEs'
Fergus Lyon, Robyn Owen & Geraldine Brennan (Middlesex University)

4.25pm  - Round table discussion

4.40pm  - Close

Commissioned by the Institute for Small Business and Entrepreneurship/Research and Knowledge Exchange Fund

A research grant  study commissioned in 2010 on how the credit crunch has impacted on the finance of technology-based small firms (TBSFs) in the UK.  This research  explored the role played by various public sector funded initiatives that had been introduced to combat the equity gap. The study involved 100  demand-side interviews with TBSF owner/managers and supply-side interviews  with finance providers, including venture capital organisations, business angel syndicates, banks, and public sector venture capital and loan funds.  The research focused on five English regions and Scotland. Key findings were that, whilst both young and established TBSFs performed well during the 2007-10 period, access to both debt and equity finance had become more difficult and had restricted business growth in 36 per cent of cases, with one third of cases perceiving future finance over the next year or two as problematic. This suggested a growing need for public sector interventions.

Download the report: The Impact of the Financial Crisis

 

Research to Support the Establishment of High Growth Start-Up Programmes in the East Midlands.

for Lincolnshire Business Link

The study was concerned with the process of identifying start-ups with high growth potential, the nature of their distinctive support needs and how best these may be addressed through the development of a dedicated support programme. The methodology included sixty interviews with key informants, a telephone survey of 100 young high-growth companies and twenty case studies. The key output of the study was a strategy for the development of support for start-ups with high growth potential in the region.

Contact CEEDR for more details on this project.

 

Commissioned by Research England and British Business Bank

This project examined the support environment that encourages entrepreneurship around universities. The work involved producing a literature review on the concept of the entrepreneurial university eco-system, including a summary of the likely key relevant features of the London eco-system. Specific attention was given to networking, business support and finance. The Middlesex team included Robyn Owen and Fergus Lyon from CEEDR with Hsing-Fen Lee and Simon Best from MLO. The project was led by the consultants SQW.

Download the Literature Review and Technical Note

Early assessment of impact of BIS Equity Scheme Initiatives

Commissioned by the Department of Business Innovation and Skills

This study provided an early assessment of the economic effectiveness of four funds that the Government introduced after 2006 to address market failures in the provision of finance to SMEs: Enterprise Capital Funds, the Capital for Enterprise Fund, the Aspire Fund and the Finance South East Accelerator Fund which is part of the Early Growth Funds. These were commercially orientated venture capital funds, investing a combination of both public and private money in SMEs seeking modest amounts of equity and mezzanine finance within the generally recognised equity gap, up to £2m.

The research involved in-depth interviews with a sample of fund managers as well as interviews with 51 applicant businesses, including some that did not complete the application process successfully. Findings showed that the BIS funds are meeting the need for modest amounts of equity finance, that they have high finance and project additionality, and that they were helping businesses leverage in additional funding from other sources. 

Download full report

Client Research England, undertaken in collaboration with SQW

This six month project examined the role and impacts of the university-led entrepreneurial ecosystem, operating in major European universities and their city or local regional hinterlands. Taking London, Cambridge and Oxford as three major UK university-led entrepreneurial ecosystems, the study developed an approach for measuring activities and impacts across Europe’s top performing entrepreneurial, science and technology universities, using this to create close and helpful comparators. Drawing on a shortlist of comparator cases, these were qualitatively assessed through a series of key informant interviews and further background data to reveal greater understanding of good practice university operations and the processes by which research and teaching is translated into local industry impacts.

Commissioned by UK Ministry Department for Housing, Communities and Local Government (HCLG) (2018-21)

CEEDR is undertaking an integral part of the national evaluation of the £2.8 billion English European Regional Development Fund (2014-20), as part of a consortium of leading UK policy evaluation organisations (led by Regeneris, and including BMG and Belmana). This will involve interim and final reporting with CEEDR and Middlesex University colleagues providing expertise in priority policy areas for SME innovation, finance and business support, low carbon adoption and social inclusion. CEEDR will lead on qualitative case study research, with colleagues from Middlesex University Business School (MUBS) providing expert guidance to the econometric analysis.

Client - Department for Business Innovation and Skills 

Over the next six years, the Centre for Enterprise and Economic Development Research at Middlesex University will be carrying out an evaluation of a flagship policy of the Government. The Regional Growth Fund (RGF) is a £2.3 bn fund that provides support for projects promoting sustainable economic growth and employment across England. This fund aims to rebalance the economy and support places that are currently dependent on public sector jobs. 

The evaluation team includes IFF Research, Belmana and University of West of England and draws on staff across the business school. The evaluation will draw on the expertise of Fergus Lyon, Ian Vickers and James Derbyshire CEEDR in relation to enterprise support and the expertise of Michela Vecchi in econometrics. The evaluation will explore the impact of support provided to enterprises to assist them to access finance and grow.  The project will be developing innovative approaches to matching large scale business data sets and surveys, and conducting case studies of complex interventions that aim to support infrastructure in particular localities.

Commissioned by Youth Business International

The Centre for Enterprise and Economic Development Research (CEEDR) and the Department of Leadership, Work and Organisations (LWO) at Middlesex University secured a global research project with Youth Business International (YBI). Commencing in January 2016, the project ended in July 2017.

This project evaluated how volunteer business mentoring assisted young entrepreneurs, both in terms of their business start-up and development as well as their personal growth and entrepreneurial journey, and informed the YBI's Global Growth Strategy.

The longitudinal project involved YBI's global network of 46 independent non-profit initiatives spanning 42 countries, which provided integrated support to under-served young entrepreneurs. It was expected to deliver high quality academic outputs and have a global impact on youth entrepreneurship policy and practice.

Six academics from CEEDR  and LWO made up the core research team, including Dr Julie Haddock-Millar (Principal Investigator), Dr Leandro Sepulveda (Co-Principal Investigator), Dr Robyn Owen (Co-Investigator), Chandana Sanyal (Co-Investigator) and Prof Stephen Syrett (Project Director)

YBI, the only dedicated global youth entrepreneurship practitioner, committed to an evidence-led approach to meet its growth target to support 100,000 young entrepreneurs globally per year by 2020.

Client - Department for Business, Innovation and Skills

Building on a previous BIS (2013) research into the pathways to external finance for UK SMEs, this work in collaboration with BMG Research, explored the pathway to external finance for the innovative business. It aimed to establish the extent to which the degree and type of innovation in businesses at all stages of the business life cycle is different in terms of the types of finance required and available. The research involved a literature study and modelling in combination with large scale UK secondary data analysis in order to establish what was known and inform a second stage qualitative in-depth survey of 50 innovative businesses in order to gain greater insight into the access to external finance processes in these businesses, ranging from the smallest employer SMEs to Mid-Sized Businesses.

View full report

 

Commissioned by the Department for Enterprise, Trade and Investment (DETI) Northern Ireland

SQW Ltd (SQW), working alongside academics from Glasgow University and Middlesex University were appointed by the Department for Enterprise, Trade and Investment (DETI) in April 2014 to undertake research into early stage and growth finance in Northern Ireland. The purpose of the study was to provide guidance on the development of early stage and growth finance, focused particularly on angel investment and venture capital, and drawing on the experience of other 'successful' locations internationally. This Synthesis Report sets out the key findings and messages from the research, and the guidance – covering a set of principles, strategic recommendations, and specific actions – that should inform the development of early stage and growth finance going forward in Northern Ireland.

commissioned by Middlesex University Business School RKEFF (2021)

CEEDR and Greenfin research hub staff at Middlesex University have developed a Green Investment Toolkit as a guide for cleantech and green sustainable innovation ventures, their potential Climate Change impact investors (such as accelerators, business angels and seed VCs) and business support intermediaries (e.g. accountants, investment readiness support organisations, Climate change advisor groups). The Green Investment Toolkit acts as a guide which helps entrepreneurs and investors to position green innovation in terms of UN Sustainable Development Goals (SDGs) and, more specifically, direct users to appropriate national baseline data sets and to presenting the most appropriate Climate Change and sustainability impact metrics that their innovation can make on the market. This tackles what is know as the Scope 3 downstream product and service users impact and can considerably help innovative ventures and their potential investors to understand each other better. We believe that the Green Investment Toolkit can significantly enhance the operation of the cleantech small business innovation financing market globally and are undertaking further development with new business case studies such as ShareMyBreak and impact investors such as Five-Thirteen and an international study in Oceania with University of Waikato. The guide is also under further development as an online reference and App device in consultation with Middlesex University Science and Technology Faculty.

Guidance for Impact Investors/Investees

For further information, please contact Theresa Harrer or Robyn Owen

CEEDR has been having an impact on government policy development for small and medium sized enterprises (SMEs) since the early 1990s, particularly with regard to business support and policy, and SME access to finance. During the last decade CEEDR has developed a strong specialism in the early-stage financing of innovative SMEs and financing the Cleantech sector.

We have worked extensively with the Department for Business, Energy and Industrial Strategy (BEIS – formerly BIS), British Business Bank (BBB) and Innovate UK (IUK), as well as other central government departments and regional level organisations.

Our work includes both research for policy (for example, into SME attitudes and behaviour) and research of policy (for example, assessments of policy effectiveness and impact).

Business support and policy

Our programme of research for BEIS has helped reshape the Government's business support offering:

• An Econometric Analysis of Public Support for Innovation on Business Outcomes (BEIS, 2017) identified firms receiving innovation support through twenty-five government programmes since 2004. It examined these programmes effect on firm performance, relating to their long-term sales turnover growth, employment growth, innovation and survival. Advanced counterfactual impact evaluation (CIE) methods were deployed using government administrative datasets with outcomes compared against matching control groups to isolate the programmes’ impact. Middlesex University’s contribution featured an examination of knowledge-spillover effects.
• The Innovative Firm’s Journey to Finance (BEIS, 2015) explored 50 case studies of UK potential high growth companies at different stages of their innovation and across a range of sectors. The study revealed key deficiencies in the UK innovation finance escalator – introducing the concept of ‘funding for failure’ where traditional grant funding fails to attract sufficient matching and follow-on private investment. This contributed to Innovate UK’s introduction of Loan Pilot and Investment Accelerator Pilot (IAP) schemes to improve innovation funding.
• Investigation into the motivations behind the listing decisions of UK companies (BIS 2013) was a response to concerns raised by the Kay Review (2012) into the operation of UK stock exchanges. Research findings indicated that established UK-listed companies were satisfied with the current operations of these markets, but highlighted increasing concerns about their viability for new younger company listings.
• Our Interim Assessment for the New Business Link Universal Offer (BIS 2012) led to various modifications to the Government's online business support.
• Barriers to the take up and use of business support (BIS 2011): Based on a large survey of users and non-users of external assistance from private and public providers, this research informed policy development through identifying various sources of market failure and assessing the extent of latent demand for business support.
• Research into the factors influencing the growth plans and potential of mid-sized businesses (BIS 2011) highlighted the mixed performance of these businesses and recommended policy support to prioritise supporting these businesses to aid the economic recovery.
• Our research informed the early stages of the delivery of Business Link's services (BIS 2009) and identified good practice for engaging with social groups that are under represented in entrepreneurship (SEEDA 2008).

SME access to finance

Concerns over SME access to finance increased from 2007, with the onset of the financial crisis and have continued through to the 2020s COVID-19 period. Our research on this topic – which started with a major study on the financial needs of ethnic minority businesses for the British Bankers Association in 2001 – has contributed to the policy discourse in relation to the extent of market failure of various types of finance, and the nature of relationship between entrepreneurs and finance providers. The past decade has seen particular focus on financing SME early-stage innovation and green finance for Cleantechs.

Exploring the success and barriers to SME access to finance

Dr Robyn Owen lead authored this policy brief. What are the potential growth impacts of external finance on UK SMEs? Who seeks it, who gets it, and who is discouraged? Drawing on analysis of the 2015 UK Longitudinal Small Business Survey of 15,502 SMEs and interviews with six senior staff from Oxford Innovation who provide finance support to high growth firms, we provide robust contemporary evidence and key policy implications. Full paper here.

Dr Owen also lead authored a follow up ERC Policy Brief An Investigation of UK SME Access to Finance, Growth and Productivity, 2015-2017 for the Enterprise Research Centre (Research Paper No 79, published 2019) which used LSBS longitudinal survey data to highlight that SME access to finance is unlikely to improve SME growth and productivity without other associated forms of ongoing business support, particularly in respect of financial management. Full paper here.

Public supported venture capital (VC) initiatives

CEEDR has developed a strong track record of scoping and evaluating Government Venture Capital (GVC) initiatives in the post Global financial Crisis period over the past decade. Our work, led by Dr Owen, has particularly focused on the early-stage financing of innovative potential high growth SMEs.

Our study of the Early Assessment of the Impact of BIS Equity Scheme Initiatives (BIS, 2010) demonstrated both the need for public intervention in the early stage VC market and its beneficial impacts on investee businesses. These results fed into the Coalition Government's decision to extend the Enterprise Capital Fund focused on start-up and early-stage investments.

The Early Assessment of the UK Innovation Investment Fund (BIS 2012) indicated UKIIF's role in addressing the current gap in the supply of UK equity finance, unmet by private and institutional VCs. Our findings underlined the continued need for government backed hybrid equity investment to support early stage innovative high growth oriented businesses in sectors such as life sciences with longer term investment requirements.

Dr Baldock (Owen) and Professor North's paper based on this research entitled 'The role of UK equity funds in addressing the finance gap facing SMEs with growth potential' was awarded best paper in the finance track at the Institute for Small Business and Entrepreneurship Conference (Dublin 2012), attracting particular interest from academics and practitioners, including the sponsors Allied Irish Banks.

Interim Assessment of Enterprise Capital Funds (ECFs) and Capital for Enterprise Fund (CfEF) a project led by CEEDR’s DR Owen for BEIS and British Business Bank (2013-14) represented a full mid term evaluation of these GVC public-private co-finance programmes investing in UK potential high growth SMEs. The reporting (as yet unpublished) demonstrated that the interim GFC CfEF mezzanine funds programme had delivered strong econometric impacts on jobs and business growth, whilst analysis of 75 ECF equity invested SMEs (mainly at seed and series A early commercialisation) demonstrated strong innovation, jobs and sales development and wider economic multipliers, leading to Treasury funding further programme tranches of upwards of £1bn.

Early Assessment of the Angel Co-investment Fund CEEDR’s Dr Owen and Glasgow University’s Professor Mason undertook this early evaluation of the UK’s then pilot business angel co-fund administered by the British Business Bank (BBB). Findings from this qualitative study which involved pairs of lead angel investors and their investee early-stage SMEs, alongside wider market analysis, demonstrated that the programme was delivering effective gap financing to leverage the scale of angel syndicate investing.

SME Finance London was a joint CEEDR and SQW scoping of London’s SME finance in 2013 to establish the need for the subsequent £85m London Co-investment Fund (LCIF) to invest in London’s Series A tech companies to help with their commercialisation.

Equity Finance in Northern Ireland – Dr Owen joined a team of researchers led by SQW to scope out Northern Ireland’s early and scale up stage finance for potential high growth businesses for DETI, Northern Ireland Government. The study’s ecosystem approach revealed the peculiarities of the NI market with strong cross border ties to GVCF and the Halo angel network, but weaker ties to mainland UK investors and Government programmes.

Regional Investment Funds – Early and Interim Assessment – Dr Owen has been working extensively with lead researchers SQW on the early and interim evaluations of the British Business Bank Regional Investment Funds, which have underpinned UK Government levelling up policy since 2017. The early assessment of the three English regional funds (Northern Powerhouse, Midlands Engine and Cornwall and Isles of Scilly) was completed between 2018-2020 and the next stage interim evaluations of these funds will take place between 2021 and 2023. Initial findings demonstrate the wide reach of the funds in these regions and the importance of British Business Bank regional presence to ensure that local business support networks (e.g. LEPs and Growth Hubs) refer to the schemes.

Green Finance and Early-stage Cleantech Innovation Finance

During the past decade CEEDR’s early-stage innovation finance work, led by Dr Owen, has developed a strong interest in green finance and the financing of Cleantech innovation. This work stream has been supported through Dr Owen’s attachment as a Research Fellow to the ESRC Centre for the Understanding of Sustainable Prosperity (CUSP; 2016-2021), where she leads a stream of research in this field.

Investment Accelerator – Evaluation (2018-2020) – awaiting publication in 2021. Dr Owen worked closely with lead researchers SQW in this early assessment of Innovate UK’s Investment Accelerator Pilot. This programme aimed to improve early-stage private equity financing of long horizon health and low carbon transport and infrastructure SME innovation from post initial proof of concept seed funding stage. It developed an innovative grant matching to private VC approach. Research drawn from funding providers and circa 40 company beneficiaries, alongside Beauhurst’s data linking econometric work and counterfactual surveys, found an effectively co-finance process, but one which required further rollout to other types of funders and larger scale funding for follow-on investing. The programme has been expanded (from £50m to £75m) and expanded to include regional business angels and larger funding rounds.

Redefining SME Productivity Measurement and Assessment for a Low Carbon Economy (2020) for the ESRC Productivity Insights Network (PIN). This research investigated early -stage cleantech innovation financing in the UK and the relationship between environmental impact performance indicators and early-stage investors’ decisions to invest in SME cleantech innovations. The report highlighted the lack of coherent UK government policy around environmental messaging for investment and the disconnects between government agencies and also between private investors and the cleantech businesses themselves. It highlighted that government policy alongside improved roles of specialist private support agencies could lead to a more efficient UK cleantech finance escalator – and in turn greater low carbon impact.

Financing high technology SMEs

Study into the impact of the financial crisis on the financing and growth of technology-based small firms in the UK demonstrated a widening funding gap, which underlined the importance of public supported initiatives.

Comparative research in relation to New Zealand (with Professor David Deakins) led to invitations to Professor David North to present at a policy symposium and to the Ministry of Science and Innovation in New Zealand on the growth potential and financing of technology-based SMEs (2011).

Access to bank finance

Our study of Scottish SMEs undertaken for the Scottish Government (2007) found little evidence that businesses with strong business cases were being turned down for finance, although there were specific issues relating to the nature of the relationship between SME owner-managers.

Middle-capitalisation (mid-cap) businesses

Our study into the difficulties that mid-cap businesses face in raising Bank Finance (BIS 2010) concluded that these constrained the growth and development of only a relatively small number of successful and moderately performing businesses. The Minister for Business and Enterprise reported these findings in a BIS Press Release (30 December 2010).

Commissioned by the Department for Business, Innovation and Skills

This was an early assessment of the UK Innovation Investment Fund (UKIIF), a UK government funded equity finance scheme to address the finance gap for early stage R&D and innovative businesses in low carbon, life sciences, digital and advanced manufacturing sectors. This fund of funds pari passu scheme, designed to stimulate private equity investment, managed by the private sector, is designed to develop one of Europe's largest technology venture capital funds, projected to generate up to £3 billion in funds over a 12 to 15 year life span. This research was an early stage, in-depth, assessment of 16 successful business applicants, fund managers and key market stakeholders. It provided early indications of the extent to which UKIIF is addressing market failures and contributing to business productivity and growth and a platform for a later stage full evaluation.

Date published: May 2012

Click here for the full report

Commissioned by Innovate UK (2017-2019)

Evaluation of the £50m Innovation Loan Pilots SME competition scheme introduced by Innovate UK. The scheme aimed to provide substantive loan funding to successful applicants – estimated as median loans of £300k to around 165 SMEs during a two-year pilot period, with loans expected to be repaid within a ten-year period. The research was peer reviewed and adopted a multi-method approach to assess the nature of demand for the loans, the application process and customer journey and early assessment of the value of the loans in terms of their additionality, impacts on innovation progress. The research involved longitudinal quantitative surveys and qualitative case studies of beneficiary SMES, triangulated with unsuccessful applicants to assess counterfactual evidence.

Please check the final report here

Commissioned by the Department for Business, Innovation and Skills

This piece of work commissioned in 2012, and in partnership with BMG Research, involved a large scale CATI telephone survey of 1,001 SME users and 507 non users, designed to provide statistically robust evidence of the extent of use of the new Business Link digital web based service and telephone helpline. It also included 52 in-depth qualitative follow-up telephone interviews with new users of the My New Business and Growth and Improvement Service elements to provide insight into website interface, usability, extent and type of use and initial impacts. 

Contact CEEDR for more details on this project or download report

Client - Department for Business Innovation and Skills and reporting to the British Business Bank (2013-2014)

This interim evaluation of two government hybrid venture capital (VC) funds was undertaken in 2014 in collaboration with BMG Research who undertook circa 100 'CATI' telephone surveys with the senior directors of portfolio companies and included a small control sample of 'dead deals' which came close to receiving funding. The survey included a full review of the funding process and resultant impacts, including consideration for wider economic impacts and Value for Money (VfM) assessment of both the ECF and CfEF schemes. Supply-side in-depth qualitative surveys were also undertaken, face-to-face and by telephone with 17 participating fund managers and 8 other private VCs and angel capital groups operating in the UK's seed and early stage markets where these schemes have been targeted. A further 6 key informant interviews were drawn from industry experts such as the British Venture Capital Association and UK Business Angles Association. The research indicated that both schemes have met equity gaps in the UK markets and that they have made some impact on developing the UK seed and VC markets. However, because the exit market has been set-back by the Global Financial Crisis, it is still too early to assess what the likely performance of these funds will be.

Contact CEEDR for details of this project

Commissioned by UK Research and Innovation (2018-2020)

An evaluation of the UKRI Pilot Investment Accelerator created to accelerate economic growth in health and life sciences and infrastructure SME projects by matching innovative businesses to Investor Partner match funding opportunities (typically through convertible loans) at an early stage in the R&D pathway. The research covers a two-year period and involves process evaluation for the competition and funding arrangements, assessment of funding additionality (from funding provider and the circa 40 SME beneficiary perspectives) and initial impacts and econometric analysis (data linking), using surveys and longitudinal case studies and counterfactual surveys of unsuccessful applicants.

Commissioned by the Department for Innovation and Skills

The main purpose of this research was to explore the drivers behind the motivations for UK company listing decisions, and related corporate governance issues. Findings from the recent Kay Review (2012) into the operation of UK stock exchanges raised concerns over market volatility and investor short termism, suggesting a need for changes that might make the markets more attractive for both investors and new entry businesses. The UK Coalition Government is concerned with facilitating business growth and understands that Mid-Size Businesses (MSBs), defined as businesses with current sales turnover of between £25m and £500m, are potentially an important driver of growth in the UK economy.

Focusing predominantly on UK owned and based Mid-sized businesses (MSBs), this research built upon the previous CEEDR/BIS MSB research (2010 and 2011), by undertaking an in-depth qualitative examination of MSBs, whilst also including some smaller rapid growth businesses with the capability of soon becoming MSBs. The research considered the various attributes of these businesses i.e. size, sector, location, age and growth aspiration, with a specific focus on variations between companies that are: (i) long term listed; (ii) recently listed; (iii) recently de-listed; and (iv) long term unlisted public and private companies.

A key finding of this research was that whilst longer established UK listed companies were satisfied that these markets were operating favourably for them, there were concerns raised amongst younger potential listing companies about the market volatility and viability, suggesting that the government could do more to develop market stability and longer investment horizons.

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Commissioned by the Department for Business Enterprise and Regulatory Reform

This report reviewed the established evidence and thinking around the challenges and opportunities that affected the UK small and medium-sized enterprises (SMEs) in the transition to a low carbon economy.  The serious threat of global climate change is primarily caused by the burning of fossil fuels and land-use change and few now dispute that there is a need for urgent collective action to achieve a transition to a low carbon and more resource efficient economy.  Although little has been written specifically on SMEs in a low carbon economy, a considerable body of relevant academic and policy literature has been identified. The review indicated that there were good reasons for treating the aim of achieving a low carbon economy as being closely aligned to that of achieving sustainable development – economic development which is environmentally and socially sustainable.

Date of publication: January 2009

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Commissioned by the Department for Business Innovation and Skills

This was a follow-up, qualitative study of 15 mid cap businesses (defined as having a sales turnover of between £25m and £500m) drawn from the 2010 Finance Survey of Mid cap Businesses. The research aimed to explore the reasons why businesses had been only partially successful or unsuccessful in raising bank finance, and whether the recent performance of the business could partly explain the problems the business was experiencing. The results showed that most of the businesses were able to obtain at least some finance, and in some cases the businesses turned down the offer because the terms and conditions were considered unsatisfactory. The application process for obtaining finance was found to be more demanding than previously, and the difficulties of accessing finance were impacting on performance in most cases.

Date published: December 2010

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Commissioned by the Department for Business, Innovation and Skills

A qualitative in depth case study approach commissioned in 2011, examined the growth aspirations and performance of 35 Mid-Size UK businesses, with between £25-100m sales turnover.

The study particularly focused on barriers and constraints to growth, both internal and external, including management competencies and finance, with a particular focus on comparing family run businesses with their Mid-Size counterparts. Key findings included that larger, export oriented and VC backed businesses performed particularly well, whilst family run businesses were moderate, more conservative performers.

There was considerable sectoral performance variation with construction and property related businesses in the UK struggling and that growth was also strongly related to the company's stage in the product/service development, or project cycle. Whilst there were no perceived current problems with access to finance for the surveyed companies, several mentioned that potential trade was lost due to customer access to finance issues and there were concerns about another economic downturn.

Further Reading

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Click here for more information about the whole project.

 

Commissioned by Department for Business Innovation and Skills

This mystery shopping exercise was commissioned to test the early stages of contact when businesses seek advice from Business Link, focussing on the level of responsiveness, professionalism and timeliness of the services. 159 businesses with genuine business needs for advice were recruited to act as mystery shoppers and were interviewed after each stage of the customer journey, starting with an initial telephone or email enquiry and progressing through follow-up calls to if appropriate a face-to-face meeting with an adviser.  In order to test different aspects of service delivery, businesses were classified into one or more pre-determined business scenarios:

(i) a growth seeking business;

(ii) a business seeking finance/working capital;

(iii) a declining business/business seeking recovery;

(iv) a business seeking training assistance; and (v) a business starting-up.

Findings showed that there was widespread satisfaction and approval of the services received.  Where dissatisfaction existed, much of it related to failures in communication at the initial stages. The level of satisfaction increased as the customer journey progressed.

Contact CEEDR for more details.

Download report: Mystery shopping the early stages of the business link service

 

Client: Middlesex University Business School Research Knowledge Exchange small grant fund (RKEFF)

The 6-month RKEFF funded project explored why early-stage impact investors and entrepreneurs struggle to assess and develop a green mission. Building on the initial findings from the ESRC PIN project (2020), RKEFF tested the proof of concept feasibility of PIN’s toolkit concept to assist green climate change ventures and impact investors. The study involved multiple stakeholders, including early-stage impact angel and VC investors, intermediary business support providers and selected case study early-stage ventures. By exploring and tracking difficulties in understanding the ‘greenness’ or sustainability intentions of a venture, the research identified key problem areas around defining and demonstrating green impact. In addressing these to the satisfaction of ventures and investors, the toolkit was refined. The developed toolkit is now being used by multiple groups and organisations as part of the Mayor of London’s Cleantech Cluster. This work is also now being developed in New Zealand in collaboration with The University of Waikato.

 

Client - ESRC Productivity Insight Network (PIN)

CEEDR, Middlesex University was commissioned to undertake a 6 month research project for the UK ESRC funded Productivity Insights Network (PIN). The project examined how to measure sustainable productivity. In an attempt to bring together the joint UK government policy aims to raise productivity and move to a low carbon economy, we focused on the financing of green/cleantech innovation and the metrics that were used by impact investors and government programme evaluators. The research aimed to develop more effective measures of sustainable productivity which can underpin future government policy and encourage impact investing.

Why Cleantech Investment Should be a High Priority Now and after COVID-19

A blog by Dr Robyn Owen & Theresia Harrer at the Centre for Enterprise and Economic Development Research (CEEDR), Middlesex University London and Centre for Understanding Sustainable Prosperity (CUSP).

For more information and to participate, please contact either Dr Robyn Owen [email protected] or Theresia Harrer [email protected]

 

Commissioned by British Business Bank (2018-2020)

An early and interim stages evaluation of the UK government’s Regional Investment Funds to support potential high growth SME early stage and scale-up development; comprising of Northern Powerhouse Investment Fund (£400m), Midlands engine Investment Fund (£250m) and Cornwall and Isles of Scilly Investment Fund (£40m). The project involves development of a robust multi-method evaluative approach incorporating qualitative process evaluation, quantitative surveys and counterfactual econometric modelling and longitudinal case studies of assisted businesses to assess programme impact, additionality and value for money across a range of loan, equity and mezzanine financing interventions in different English regions.

Commissioned  by the Office of Government Commerce, H.M. Treasury and Department for Business, Energy and Regulatory Reform

The Glover Review on SMEs and procurement aimed to examine the role of SMEs in delivery of public services, the barriers they faced and the actions the government took to reduce these. The evidence base was lacking regarding the number of SMEs supplying the public sector and the scale of their input. There were further difficulties from the range of definitions for SMEs used and the difficulty of measuring the extent of SME subcontracting. The objectives of this research were to: Identify relevant existing data sources on SMEs and public services and assess the relative quality; identify research papers and studies related to SMEs and public services and assess the relative quality, scope and key findings;  and identify the gaps in research and data collected to date.

Contact CEEDR for more info on this project.

Commissioned by the Scottish Government

This study examined whether firms were experiencing difficulties in accessing finance because of the unsuitability of the business case that they were putting to finance providers (i.e. demand side issues), or whether the difficulties resulted from sub-optimal lending practices, resulting in some potentially viable proposals being rejected (i.e. supply side issues). This required knowledge of lending practices, including credit scoring methods used by the banks, and their implications for different types of small business, as for example differentiated by sector, size, age, and gender of the owner.

Contact CEEDR for details of this project.

Client - EXACT

Initially, this was a pilot project undertaking two quarters of research during the latter part of 2014 to examining various aspects of small business efficiencies for a commercial client. The aim was to design and undertake quarterly on-line survey research of 750 UK SMEs, establishing an Index of Business Efficiency and also looking into specialist topics in each quarter. Q3, 2014 examined time management issues and also included follow up business case studies. For each quarter a short 'white paper' style report was produced highlighting key issues for UK SMEs to address.

Commissioned by the Greater London Authority

This research was commissioned by the Greater London Authority (GLA) in 2013, to establish the main gaps in SME finance currently in London and assist the GLA and London Enterprise Panel in the development of a new SME finance programme utilising £25m from the Growing Places Fund.

The research, undertaken by CEEDR and SQW, took place in August 2013 and involved a comprehensive review of the most current SME finance data pertaining to London and the wider UK economy, a series of interviews with key debt and equity finance providers in London and a small number of case study business interviews.

The key findings from the research demonstrated that London is markedly different from the rest of the UK. SMEs in London exhibited greater churn than elsewhere, with very high start-up and failure rates and a higher proportion of young high growth businesses. London's Tech City was highlighted as a boom area for young high growth businesses. However, whilst London is a centre for financial institutions and is better served than the rest of the UK, particularly in equity risk finance, the study revealed a number of finance gaps. The main finance gaps were in start-up and early stage debt finance, mezzanine finance for more established business restructuring and lower growth SMEs and a range of equity finance from small-scale early stage investment through to larger-scale follow-on finance.

The report recommended that the GLA could add greatest value to the London and wider UK economy by developing a flexible equity fund to support London's young high growth businesses and encourage greater private equity investment activity through co-funding arrangements.

Commissioned by the Natural Environment Research Council (NERC) and Finance for Biodiversity (F4B), in 2022 this 9-months project  examined the UK SME finance markets in relation to how they risk assess the Climate and Biodiversity impacts of their SME finance customers and portfolios. The project focused on the processes by which finance providers (debt, equity, supply-chain and insurance) can advise and encourage SME self-reporting to facilitate the improved operation of UK SME finance markets for a sustainable future.

The research involved multiple stakeholder interviews (150+) with SME finance providers and related support agencies, alongside the collection of secondary data, reporting and academic literature. The research also included 11 business case studies providing examples of large business SME supply chains, B Corp accredited self-reporting SMEs and innovative SMEs that take into account Climate and Biodiversity impact measurement and reporting. Our research partner Shoremount, a consultancy with expertise in training SMEs for ‘B Corp’ certification, assisted enterprise case selection and analysis of what works for SMEs in respect of their Climate and Biodiversity self-reporting. Our research findings were sense-checked through a series of stakeholder workshops during Summer/Autumn 2022.

Additionally, a case study of the agri-food sector was undertaken, involving multiple stakeholder interviews and the UK small farming community.

Key research findings offer practical policy guidance to the Task Force on Nature-Related Financial Disclosures (TNFD) to encourage and improve the Climate and Nature Positive reporting activities of SMEs, offering policy briefing and also toolkit support for green impact SMEs and their investors, bankers and insurers.

For further information, please contact:

Dr Robyn Owen; [email protected]
Professor Fergus Lyon for agri-food case study; [email protected]
Dr Amy Burnett, research manager; [email protected]

NERC Outputs
SME Finance for Biodiversity (‘FinBio’) in the UK - Project Summary
SME Financing for Biodiversity - Key findings and recommendations
How to Guide on Climate and Nature Positive Investment 

You can also find more resources and information from the project webpage, including a video of the headline findings.

Project Webpage: Building Nature Measurement and Impacts into SME Financing (‘SME FinBio’)

Video summary of the SME Financing for Biodiversity Headline Findings

The Growing Role for Biodiversity and Nature Positive Impact Investing - Presentation to Seedtribe and 5-13 investor networks

Leading Research in Social Enterprise and Sustainability

The UK is a hotbed of social enterprise, home to thousands of thoughtful and successful businesses that reinvest profits into social problems, communities, the environment and bettering people's life chances. Since 2000, the academics and research students at CEEDR have worked at the forefront of research into this thriving sector.

Leading the charge

In addition to a number of influential projects for different government departments, CEEDR was the social enterprise lead in the Economic and Social Research Council's (ESRC) Third Sector Research Centre and directed the ESRC Social Enterprise Research Capacity Building Cluster. We have also recently completed another commission from the ESRC to examine social enterprises and mutuals that spin out of the public sector.

What happens next?

At CEEDR, we're always thinking about how our research will help shape government policy that will benefit social and sustainable enterprises. You can find out more about the impact of our research on both policy and practice – including relevant case studies - by following this link.

Our research also feeds into a number of courses, including those run by CEEDR and guest lectures in different modules across the Business School. Moreover, it also supports the growing PhD programme within CEEDR.

Here are just a selection of our recent research projects on social and sustainable enterprise:

• Evaluation of the Regional Growth Fund
  Client - Department for Innovation and Skills
• Financing social ventures and the demand for social investment
  Client - ESRC Third Sector Research Centre
• Environmentally-motivated social enterprise growth strategies
  Client - ESRC Third Sector Research Centre
• Evaluation of Data Lab Project
  Client - New Philanthropy Capital 2013-2016
• Evaluation of the School for Social Entrepreneurs Core Programmes (2013-2017)
  Client - School for Social Entrepreneurs (SSE)
• Social enterprise models for delivering health and social care public services
  Client - A Knowledge Transfer Partnership with HCCT, London 2012-2014
• Social Enterprise Research Capacity Building Cluster
  Client - ESRC and Cabinet Office
• Third Sector Research Centre
  Client - ESRC and Cabinet Office
• The role of mutuals in public service innovation
  Client - ESRC, BIS and NESTA
• Social enterprises and the Big Society
  Client -  ESRC and ISBE
• Social Enterprise Investment Fund
  Client - Department for Health
• Review of the Social Value measurement 
  Client - Citizens Advice Bureau
• Evaluation of the School for Social Entrepreneurs right to request support programme
  Client - School for Social Entrepreneurs
• Supporting scaling up and social franchising
  Client - A Knowledge Transfer Partnership with London Early Years Foundation
• Developing environmental Social Enterprise
  Client - A Knowledge Transfer Partnership with Social Enterprise East Midlands
• Joining the Dots - Social Impact Measurement
  Client - East of England Development Agency
• Evaluation of the Innovation Exchange Brokerage Model
  Client - Innovation Exchange
• Alternative approaches to Capacity Building
  Client - Capacity Builders and Cabinet Office

Commissioned by Sussex Enterprise Services Ltd and South East of England Development Agency 

This project was aimed at informing the development of the Business Link Enterprise Gateway Service in South East England.  A key objective of the Enterprise Gateway (EG) Service is to help raise awareness and understanding of enterprise and self-employment opportunities and to make the support (particularly pre-start) more accessible to disadvantaged communities and social groups that are underrepresented in enterprise. 

Such groups include ethnic minorities, new EU migrants, lone parents, women returners, young people, older people (50+), long-term unemployed, people with disabilities, ex-offenders, rural communities and others.  Research was conducted in order strengthen the evidence base for the EG support service, including with respect to the targeting of support; which methodologies and interventions work best for which target groups and spatial areas; establish critical success factors and barriers facing EG services in moving forward with target groups and spatial areas; establish the best routes to engage with target groups via marketing and outreach.

Contact CEEDR for more details on this project.