The UK Government aims to build a low-carbon, ‘green growth’ economy to meet net-zero and biodiversity goals, ‘level up’ the economy, and lead in the global green sector.
A new report co-authored by IFB Partner, Robyn Owen of Middlesex University, examines how to finance the green transition for small and medium-sized enterprises (SMEs) in England. Research shows that access to debt finance for this transition is uneven, with smaller, less-resourced SMEs in rural areas being the most disadvantaged. The report is based on 21 interviews with stakeholders in the debt finance sector, including banks, alternative finance providers, and business support organisations, focusing on urban London and rural South-West England.
The key finding is that a two-tier system has developed for SME financing. Larger, well-resourced SMEs can access traditional bank loans and government green grants, while smaller SMEs struggle to secure the finance needed for their green transition. These smaller SMEs often turn to alternative non-bank finance, with brokers playing an important but inconsistent role. Additionally, limited and poorly targeted grants, along with property restrictions for landlords and tenants, hinder the green transition for many SMEs.
The full report is available here.