New economic study commissioned by GE Capital shows greater use of alternative funding for SMEs could create 311,000 new jobs by 2020.
Monday 17th October 2011 -- The increased use of accounts receivable (AR) finance by UK SMEs could provide the additional funding and working capital finance that could facilitate the creation of over 300,000 new jobs by 2020, according to an in-depth econometric report commissioned by GE Capital. The increased flexibility and improved cash flow benefits offered by AR finance could also provide a much needed boost to the UK economy, improving GDP by 2.09%, or £6.99 billion a quarter by Q4 2020.
The report, which combines detailed econometric modeling and interviews with more than 70 key stakeholders and users across Europe, examines the current and future economic impact of AR finance across the UK, France, Germany and Italy.
According to the report's findings, more than 250,000 jobs in the UK are currently reliant on the availability of AR finance and without this source of finance the UK economy would immediately contract by £4.91 billion per quarter in Q4 2011.
§ Currently, 1.84% of UK GDP and 258,000 jobs in the UK are reliant on AR finance
§ By 2020, the UK economy could grow by an additional £7bn should use of AR increase from 42,000 SMEs today to 105,000[1]
§ By 2020, the manufacturing sector alone could grow by an additional £3.1 BN (44% of total potential economic output) and 73,000 jobs from expanded use of AR finance
John Jenkins, CEO, GE Capital UK said, "AR finance plays a crucial role in enabling UK SMEs to take advantage of growth opportunities, improve cash flow and enhance business flexibility. For the first time this research has been able to quantify those benefits to the UK economy and it's clear that, at a time when the UK is desperately searching for growth, greater awareness and uptake of AR finance is one way that such growth could be found.
"The findings of this report are extremely pertinent as UK SMEs struggle to find access to finance and with the UK economy remaining suppressed. UK SMEs are looking for affordable, easily accessible funding which provides the flexibility needed to match their immediate requirement to grow and expand. What this report clearly shows is that the availability of this form of finance is absolutely key for the UK economy to grow and recover."
The research findings are based on an in-depth review of data on lending and other asset based activity; economic and finance statistics and commentary from the various central banks and governments; proprietary data from GE Capital on trends in the usage of AR finance products; interviews with relevant business and finance industry networks and government organisations and over 50 businesses who currently utilise AR financial products. Drawing from these findings and insights, an economic model to quantify the wider economic benefits to each economy of current and future usage of AR finance instruments was deployed which considered a number of scenarios.
[1] Based on discussions with the Asset Based Finance Association, 100,000 to 110,000 companies would benefit from AR finance usage.
Zoe Chambers
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