B-North: SME funding in the face of Brexit

Jonathan Thompson
- Leadership - Oct 15, 2019

Jonathan Thompson is the CEO of B-North, the Manchester-based challenger bank providing funding for SMEs using cloud-based banking technology. As the latest Brexit date draws closer, Thompson looks at how funding may alter for SMEs.

We live in interesting and difficult times, due to the prolonged uncertainty of Brexit. 

It’s no secret that Small and Medium-sized Enterprises (SMEs) form the core of the UK economy, being responsible for 52% of all private sector turnover and 60% of all private sector employment in 2018. 

When we leave the EU, SMEs will more than likely take a hit – especially those that export goods to the European Union. Tariffs and a hike in importer costs due to a weak pound will leave smaller enterprises boxing off the back foot as they adjust to a major economic transition.

Many banks are approaching the uncertainty with extreme caution – slowing down lending to build a capital buffer. Barclays, for example, moved £166bn of client’s assets to the Irish capital, and set aside £150m for Brexit chaos, expecting a slowdown of economic growth by 0.3% and an unemployment spike of 5.7%.

If there is a downturn due to extended uncertainty and/or a disruptive Brexit, big banks and other large lenders are likely to tighten the purse strings for security. There are already barriers and difficulties in regards to SME lending, Brexit will simply make the problem more acute. 

As Mike Cherry, national Chairman of the Federation of Small Businesses, commented in February: “When times are hard for banks, lending to small firms often goes out the window as institutions flock to safe havens – we saw that in the wake of the financial crash.”

Barclays aren’t the only ones preparing for a hard Brexit. The likes of British Steel, Credit Suisse, Airbus and many more big companies are either down-scaling their UK presence or up-scaling their European presence.

And yet, Brexit may actually be a huge opportunity for SMEs as the future of a growing British economy. 

Despite Brexit anxiety and big businesses moving operations and assets abroad, unemployment rates reflect positive movement in the UK underbelly, dominated by SMEs. In March, it was reported that UK unemployment had fallen to 3.9%, a 44-year low, despite Brexit fears. 

UK SMEs are nothing if not resilient, and the anxiety and (eventual) conclusion of Brexit may put smaller businesses in a position of strength, as they have the flexibility to escape major regulatory changes – something that big operations just don’t have. 

Bigger businesses that are struggling with the demands of Brexit may turn to these small businesses to take advantage of their flexibility, as well as specialist skills, services and knowledge – and to avoid committing to the costs of working with bigger players.

This suggests that the growing SME sector will be key in bolstering the UK economy post-Brexit. But with bigger banks put under pressure to stop lending to smaller firms, other sources of funding will be key to facilitate the continued growth of UK SMEs. 



B-North already aims to be ahead of the curve in SME lending. As more banks take a conservative standpoint, the resulting gap in funding for SMEs will enable PBN to embed its lending products within the north-west SME community and the wider UK landscape.

Not only are SMEs more flexible than their larger counterparts, B-North’s ability provide debt capital in 10 working days as opposed to the months it takes for large banks will help them remain agile and gain funds as and when they need it. Thanks to our cloud-based banking solutions and pod infrastructure, we can keep a low-cost base – whereas larger banks may have to cut staff and services in order to keep up with the financial demands of Brexit.

We anticipate the number of smaller banks will grow in size as a consequence of Brexit which, in turn, could lead to a real diversification of the sector. More banks, more choice. Better for small banks, better for business.

As SMEs have faster access to funding the sector will grow, bolstering the UK economy – whatever the future holds. 

[Image: Jonathan Thompson (left), and David Broadbent, CFO (right).]

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