SOTA Review

Regional Differences Accessing Finance in UK SMEs: Do they matter?


Associated Themes
  • Finance

In recent years, there has been a growing body of empirical evidence examining spatial variations in access to bank finance in UK SMEs. The overwhelming bulk of this work suggests a firm’s geographic location plays a crucial role its ability to access finance. Innovative and growth-oriented firms seem those most affected. Regions most adversely affected are peripheral and rural areas with sparse bank branch networks. The main causes of these disparities seem to be connected to the pervasive use of new automated lending technologies and the rapid decrease in the size of the UK bank branch network. The knock-on effect of these trends may be increasing the use of other forms of substitutive finance and increased levels of borrower discouragement within SMEs located in peripheral areas. From the evidence base reviewed, it would appear that regional funding gaps do exist and they do matter. The full impact of their effects on firm performance and wider economic growth remain unknown however.