At the beginning of the month, Barclays launched a brand new £500 million fund to empower small businesses in the north of England. This comes as a part of the UK’s Northern Powerhouse Initiative, which seeks to develop the region’s economy as a whole. As Brexit approaches in 2019, this fund, along with the Northern Powerhouse Investment Fund and several other smaller initiatives, such as Iwoca’s £100 million pledge, are a welcome resource for SMEs in regions that have seen slow growth and decline even as the the UK economy as a whole has continued to grow.
Empowering small businesses
The new investment fund is designed to promote disruptive innovation and growth among small businesses in the region. Specifically, it’s targeted at businesses in the manufacturing, transport, and logistics sectors. Improvements in these industries can have far-reaching benefits, since they directly impact the effectiveness of the businesses that use their services.
This initiative comes just in time to help develop small businesses that are thirsty for investment leading up to Brexit. In regard to the new fund, Barclays CEO Jes Staley stated:
“As the UK prepares for Brexit, it’s vitally important that businesses, civic leaders and Government work together to make the Northern Powerhouse a reality. That means supporting entrepreneurs and businesses to succeed, but it also means providing more ways into high quality work.”
Staley’s concern about Brexit is well founded. The UK’s regionally unbalanced economy has left northern England behind, leaving regional businesses, particularly SMEs, in particularly dire straits. Worse, the country’s economic success leans heavily on international relationships, which Brexit may imperil.
The UK economy needs a northern powerhouse
Since the announcement of Brexit, rising foreign investment has buoyed the UK economy, helping the country to continue growing at a healthy rate despite grim predictions by experts. Unfortunately, much of that growth has been centred around London, leaving other parts of the country, notably including the north of England, behind. Worse, the UK’s miniscule 0.1 per cent growth in first quarter of 2018 suggests that the economy as a whole is beginning to stagnate.
With the ongoing uncertainty about how the UK’s exit from the EU will be managed, or how it will exactly impact the economy, the country needs to prepare itself for a wide variety of potential outcomes. London’s financial industry has already showed signs of weakening, with over 20 banks committed to moving to Germany as of April 2018. To strengthen the British economy overall, it’s essential for the country to pour resources intro strengthening small businesses and diversifying the country’s economic power both geographically and in terms of its industries.
New funding may bolster restrained confidence
While businesses around the capital are able to access funding through foreign investment, SMEs in other parts of the country are left to find other ways to survive and thrive. However, many have not done very well, and don’t expect the Northern Powerhouse initiative to ease their troubles. Of the businesses surveyed, around two-thirds indicated that they don’t understand how they’ll be affected by the measure. After years of weak business and investor confidence in the measure, this new windfall may finally help to change that.
Much of the direct investment by the government thus far has gone directly into infrastructure, with over £13 billion to be poured into ambitious transport development by 2020. As a part of the Northern Powerhouse, funding for small businesses has only become available fairly recently, with the new Barclays fund representing the largest of its kind so far. The government’s own Northern Powerhouse Investment Fund (NPIF) comes in at a smaller £400 million. Now, qualifying small businesses will finally have access to the resources they need at this critical time.
Diversifying the UK economy
Because of the ongoing chaos surrounding Brexit talks, it’s unclear exactly how the UK’s economy will be affected when it finally goes into effect in a year’s time. An international economic centre like London, however, could potentially face serious difficulties, depending on how well the transition is managed by the government. In light of this, it’s important for the government to focus on other parts of the country, and to ensure that domestic industries are humming nationwide. Should it succeed, the Northern Powerhouse may, through its own growth, provide the economic power to keep the UK strong while its traditional economic centre adapts to its new international environment.
In a time of change, small businesses are a vital resource. They can adapt rapidly, and quickly implement new innovations to succeed where larger businesses are entangled by their own bureaucracies. By investing in small businesses now, Barclays and the government aren’t just combating regional wealth inequality, but also attempting to create a more resilient national economy.