Publication

Demand and supply-side financing issues ( Frictions ), Growth expectations and Investment plans : evidence from UK SME’s

Published: 26 October 2026

ERC Research Paper No 124

Associated Themes

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  Business Growth
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  Finance
• 
  Innovation

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UK business investment has been low for decades relative to other G7 economies. Low investment in fixed capital, skills and innovation matter as they lead to reduced labour productivity growth and lower living standards. Among factors blamed for low investment by SMEs, issues with finance supply (e.g., cost of borrowing) and finance demand (e.g., risk/control/debt aversion) as well as low-growth ambition and expectations have received considerable attention from policymakers. In this context, we examine how SME investment plans are driven by the growth ambition and growth expectations of their owners (‘entrepreneurs’) and a lack of financial resources.

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