Sector Focus


Europe’s first sustainability- linked loans are launched

Virgin Money has become the first bank in Europe to link loans to business going green. The self-styled ‘new disruptive

Richard Bearman: Help for entrepreneurs

Gen Y leads the way for start-ups

Millennials are leading the way when it comes to starting new businesses in the West Midlands, according to a start-up funder. Start Up Loans – part of the

British Business Bank – says that millennials (or generation ‘Y’) have taken up the majority of the loans it has issued in the nine years it has been operating (54 per cent). That is based on offering more

than 2,500 loans to unemployed people in the West Midlands since 2012, with the total funds pledged topping £11.3m. Start Up Loans said it had

continued to support would-be entrepreneurs during the coronavirus crisis, delivering more than £1.2m of funding in the region in the 12 months up to March of this year. Richard Bearman, managing

director, Start Up Loans said: “Start Up Loans is uniquely positioned to drive the nation’s investment in creative, entrepreneurial talent of any age, thanks to our extensive network of delivery partners and support services. “As well as a loan, we support individuals with the practical steps they need to take to begin their own enterprise from writing business plans, accounting and marketing, as well as access to learning with partners such as The Open University. “It is paramount that we do

everything to empower the next generation of young working talent, who have an important part to play in unlocking the UK’s economic recovery, by giving them every chance to succeed, whatever their circumstances. “Unemployment can have a

catastrophic impact on an individual’s financial security, self- confidence and ability to apply for finance from lenders, and the support provided by Start Up Loans can be of particular use to younger, less experienced business owners.”

60 CHAMBERLINK June 2021

force in UK banking’ says its sustainability-linked loans (SLL) will reduce the cost of finance for those businesses whose core activities are helping the economy become more environmentally friendly. The scheme was developed by

Virgin Money in partnership with Future-Fit Foundation, and is delivered through what is called an ‘environmental, social and governance (ESG)’ assessment, which basically questions a business to find out how ‘green’ it is.

The FF Foundation is a charity

of them had managed to put into practice. More than half (57 per cent)

that wants to make the world economy more environmentally- friendly. Virgin Money, which brings together Clydesdale

‘We firmly believe that we, and other banks, have a duty to direct capital responsibly’

Bank, Yorkshire Bank and Virgin Money, says it is the only bank outside the ‘Big 5’ that boasts a genuine full-service personal and business banking capability. Under the new loan initiative, any business that

wants to borrow at least £250,000 and has a ‘sufficiently strong’ ESG assessment, any loan provided by Virgin Money won’t incur an arrangement fee. Virgin Money has committed that five per cent of

all its business loans will be to firms driving environmental and social change by September 2022. To back up the initiative, Virgin has carried out a

survey among the UK’s small to medium enterprises (SMEs), to find out how sustainability is to them. Virgin says the survey revealed that a massive 85 per cent said it was important – but only 43 per cent

said that cost made it difficult for their business to be more sustainable. Graeme Sands, corporate and mid-market director, Virgin Money (pictured), said: “While businesses overwhelmingly recognise the importance of sustainability many, especially SMEs, struggle to translate good intentions into a clear plan and are worried about the cost and time involved in implementing an ESG programme. “This is why we partnered with

Future-Fit Foundation, to help SMEs and other businesses manage and measure sustainability. “The benchmarking tool

enables us to identify those businesses with capabilities that

proactively drive other companies or consumers to create a more sustainable society and the loans will help these companies grow faster and help relieve some of the cost pressure. “We firmly believe that we, and other banks, have

a duty to direct capital responsibly.” FF Foundation co-founder Martin Rich said: “Every

business must play its part in solving today’s most pressing social and environmental challenges, not only to ensure we transition our economy to operate within planetary boundaries and to meet societal needs, but also because it makes sound business sense. “Any organisation which fails to step up is at risk

of losing its customers and potentially its licence to operate. Getting started can be daunting, not least for SMEs, which is why we’re excited about our collaboration with Virgin Money, who share our vision not only to make a positive impact but to help others do the same.”

Borrowing falls as economy recovers

UK firms are now expected to slash their borrowing this year – and it’s all down to the economy rebounding more quickly than expected. According to a new

report into bank lending by EY’s ITEM Club, UK firms will want to borrow £19bn this year, down from an expected £26bn just last February. The reduction is due to

less money being needed for recovery purposes. Banks lent businesses £35.5bn in

net terms (including Covid-19- related Government-backed loans) last year – an eight per cent year- on-year increase – primarily to help firms through the pandemic. With the economy re-opening, growth in lending volumes is set to

halve by the end of this year (to four per cent) and slow further in 2022 to 1.6 per cent, as businesses increasingly focus on repairing their balance sheets. These forecast figures

are modelled on the Government’s strategy for easing pandemic- related restrictions. The decrease in

lending volumes has

been accompanied by an upturn in consumer spending

levels, to near pre-pandemic levels. Anna Anthony (pictured), UK

Financial Services managing partner at EY, said: “Given how difficult the last 15 months have been for millions of families and businesses up and down the country, it’s encouraging that the economic recovery will be quicker and stronger than initially

forecast. That’s not to say though that there won’t continue to be challenges ahead. “For the banking sector, the

lockdowns have had a unique and divergent impact on lending volumes. While many businesses borrowed more than normal just to survive and millions of consumers repaid record levels of personal debt and borrowed less, these patterns will likely be relatively short-lived. “The banks will continue to

support businesses and households through the pandemic and beyond, but modest lending growth on some fronts combined with the ongoing very low interest rate environment means the pressures on profitability will remain front of mind for the sector for the foreseeable future.”

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