PROFESSOR DYLAN JONES-EVANS

One of the most significant economic and social changes during the Covid-19 pandemic was the acceleration towards the adoption of digital services in both the public and private sectors.  Online meetings via platforms such as Zoom became the norm as did ordering and paying for food via apps on a night out. And as banks limited their services during lockdown, the increase in the use of digital payments for everything from ordering online to tapping a console when paying in a shop continued to grow. Yet despite all of this technological change, research showed that over 8 million people in the UK (or 17% of the population) still have difficulties living in a cashless society. More relevantly, this issue was not related only to the challenges of Covid as smaller communities across the UK had borne the brunt of the restructuring of the banking sector with estimates that nearly 5,000 branches had been closed since January 2015. Even prior to the pandemic, dealing with the issue had been...

When I undertook the Access to Finance review for the Welsh Government that culminated in the recommendation for a Development Bank for Wales, it was important to ensure that detailed research was undertaken to demonstrate the case for closing the finance gap faced by small to medium-sized enterprises (SMEs). Given that prior studies had showed that, in general, SMEs had encountered increased difficulties to access bank credit following the global financial crisis, we wanted to understand if this was the case in Wales and whether the geographical location of banks across the UK had any impact on SME access to bank finance. To do this, we analysed data on bank lending gathered by the SME Finance Monitor which, since 2011, has questioned 5,000 different SMEs quarterly in the UK about their borrowing events. More than 65,000 interviews have now been conducted as part of this survey, building into a considerable dataset on the past and future finance needs of SMEs in the UK. We hav...

My latest journal article, written with Dr Tianshu Zhao of Birmingham Business School, has been published by the 4* Journal of Economic Geography . Entitled "SMEs, banks and the spatial differentiation of access to finance", it utilises the SME Finance Monitor and a unique dataset on the geographical location of all bank branches in 11 UK economic regions, to examine the relevance of spatial differentiation on SMEs’ access to bank finance during the period of economic weakness following the 2007 financial crisis. We find evidence suggesting the presence of a regional-specific effect on SMEs’ access to bank finance. Our findings show that greater functional distance between bank headquarters and branches exacerbates the credit constraints faced by local SMEs although the impact of a smaller operational distance between branches and local SMEs is inconclusive, ceteris paribus. Our finding holds over a battery of robustness tests.

After a two year long investigation, the Competition and Markets Authority (CMA) has released its final report into retail banking. An important part of this study focused specifically on business current accounts for small to medium sized enterprises (SMEs), given the concerns that have been expressed during the last few years that there were difficulties in the lending process from UK banks to firms. Banks are an important source of finance to SMEs not only when the business is established, but also when it needs short-term financial assistance to deal with cashflow issues and during periods of growth when it needs funding to expand. And whilst the CMA does not take the radical step of breaking up the big banks, the report is an important step forward in increasing the efficiency and effectiveness of capital flows from financial institutions into businesses. Its first significant finding relates to how SMEs choose their banks for funding. According to research undertaken...

On Wednesday this week, following a Welsh Conservative debate on access to finance for small to medium sized enterprises (SMEs), a majority of AMs in the National Assembly for Wales agreed “that Finance Wales does not fully meet the needs of small businesses across Wales and that access to finance is still a problem for many SMEs”. They also called on “the Welsh Government to establish a Welsh Development Bank as recognised in the report published by Professor Dylan Jones-Evans”. This was another step on the road to ensure that SMEs, the engine room of the Welsh economy, are given the financial support they need to grow to create further wealth, jobs and prosperity for the nation. Whilst there is some way to go, it is not as if the Welsh Government has been sitting idly by since I started the first ever review into access to finance for SMEs for the Welsh Government in 2013. At the time, a major concern expressed by a number of stakeholders interviewed was the fact that there...

Since the 2008 financial crisis that led to the worse economic downturn since the 1920s, the high street banks have introduced more stringent rules regarding credit availability that have reduced the terms of loans and the affordability to many businesses. For example, whilst the average length of a commercial banking loan was approximately nine years for accounts opened in 2008, this was shortened to approximately five years in 2009, and has continued at that level since thus making lending less affordable to many businesses. Indeed, the latest Banking Taskforce Appeals Process Review for the UK has shown that for bank lending above £25,000, nearly half of the businesses cited affordability as the key reason for banks declining their request for a loan. Whilst it seems that little is being done to address the issue of affordability of finance in the UK which is restricting funding to many SMEs, the Irish Government has recently decided to deal with the lack of credit being made ...

Six years on, many still blame the banks and other financial institutions for the events that led to the economic crisis of 2008 that then plunged the World into the deepest recession in a generation. Since then, various scandals have emerged which have continued to damage the reputation of the banking community, including the rigging of interest rates such as Libor, money laundering and the misselling of PPI loan insurance. However, for most small firms in the UK, the issue of interest rate swaps is probably the one that has had the most impact not only on the sector itself but on its relationship with the high street banks. Simply put, swaps are insurance policies designed to protect against the risk of higher interest rates. The problem arose when interest rates started to fall as the Bank of England tried to kickstart the recovery. This left those companies who had been sold swaps as part of their loan agreements with bills typically running into tens of thousands of pounds...

During the last ten months, the access to finance review commissioned for the Welsh Government has undertaken an extensive analysis of access to finance to SMEs within Wales. In June 2013, it made a series of recommendations in the first report that are currently being implemented by the Welsh Government. Some of these - including the development of a commercial finance comparison website, close links between the banks and business support, and the improvement of trade credit via the Welsh Government’s own procurement rules - have the potential to make a significant impact on access to funding for Welsh SMEs. In addition, the launch of Start-Up Loans programme in Wales could provide a major boost in enabling many potential entrepreneurs to have the in initial funding they require to begin a new venture. The evidence from the report suggest that major challenges still remain and that the current approach in providing access to finance in Wales is not fit for purpose. For the ...

In January 2013, the Minister for Economy, Science and Transport announced an independent review into access to finance for SMEs in Wales. Supported by a voluntary advisory panel from academia and business, the aim of the review has been to examine how effectively SMEs in Wales are served by existing sources of funding, identify areas of particular challenge and provide recommendations for action. There are five sections to the report, namely: Banks lending patterns to SMEs Alternative sources of funding The role of Finance Wales The principles of public funding for SMEs the case for a Development Bank for Wales. Over the next five days, I will be publishing each of the sections individually so that those wishing to respond to the review can understand each aspect of the issues surrounding access to finance to SMEs that have emerged from the 10 month consultation. This blogpost will examine the current state of lending by the banks to SMEs in Wales. It will update the...