Leading Research and Knowledge Exchange on Business Finance

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Summary

The ability of companies and organisations to pay and recover debts affects and reflects the financial health of UK PLC. Research by the Credit Management Research Centre (CMRC) led by Professor Nick Wilson has directly influenced UK government policy and regulation, leading to the development of tools and guidance to alleviate short and long-term financing problems for large and small businesses and organisations. The research has improved understanding of alternative forms of corporate finance for new ventures, growth and corporate restructuring. Improved knowledge has been gained on why some businesses grow and others fail in relation to financing, financial management and governance. Research has led to changes in the debt management systems and procedures in the public and private sector.

Our research

CMRC research has focused on finance and credit management in two main areas: business finance (corporate and small and medium-sized enterprises (SMEs) and large volume consumer lending and debt collection. The research analysed the availability and quality of credit information, short and long-term business financing; debt collection and recovery systems and methods for improving risk modelling techniques. This work is underpinned by a philosophy that better access to, and use of, information can improve credit management and alleviate financing problems for businesses and organisations. The body of research, spanning a 15-year period, was based on quantitative survey methodology, econometric analysis of large databases, and interviews with government departments, utilities and financial services.

Impact

CMRC's work on trade credit and SME financing has fed into the development of UK national policy and legislation over a number of years. This work has been highly regarded by the UK government and the small business community. 

Working with policy makers

The 2008 BERR Policy Report on payment trends and behaviour helped policy makers understand the significance of trade credit and its overall role in business financing as well as the impact of cyclical variations.

The Bank of England utilised CMRC data to track SME lending and CMRC research in their examination of SME finance, highlighted issues relating to credit rationing, the credit information infrastructure and competition in corporate lending.

CMRC research reports have also contributed to increased knowledge of alternative sources of business finance. The British Venture Capital Association was able to use CMRC research to objectively demonstrate that businesses could make better use of alternative forms of business finance.

Findings from the two areas of work on trade credit and alternative business finance were considered by the Breedon Task Force (BIS 2012). Wilson was a member of the Expert Economists’ sub-group which was responsible for ensuring that the evidence feeding into the Breedon Taskforce policy discussions was both robust and comprehensive.

CMRC has advocated greater credit data sharing with non-bank providers to support the development of new finance products and markets to benefit business. CMRC has published a guide for SME's seeking sources of funding.  

Working with businesses

CMRC's work has also altered behaviour in the public and private sectors.

Research on credit information, risk scoring and best practice in debt management in the private sector was used by HMRC and the NAO in studies of debt management in government. Wilson’s role in advising HMRC is reported in ‘HM Revenue & Customs Management of Tax Debt’ (2008). The recommendations, many of which have been adopted, included using different strategies for recovery and a restructuring of the processing systems, together with better liaison between departments.

CMRC has helped to implement a Voluntary Code of Best Payment Practice for use at large institutions and corporations, which has been promoted by government. CMRC events and forums have enabled government and major service providers such as utilities to share best practice and learn from industry as well as improving awareness of credit management.

The research contributed to the creation of a University spin-out company, CreditScorer Ltd, which developed online benchmarking and risk management services for businesses and utilities. Wilson's work in developing algorithms that generate real time risk scores and default probabilities also contributed to the foundation of another business, 'paymentleague.com', which provides rankings of payment performance by big companies. 

Research grants

  1. Wilson, N., Institute of Credit Management, ICM Chair in Credit Management, (1998-2003): £400,000 and (2003-2008): £235,000
  2. Wilson, N. with Swansea University – funded by Welsh Assembly, (2011), ‘Past, present and future: The comparative performance and sustainability of high growth firms in Wales’, £8016
  3. Wilson, N. with Clacher, I., Veronesi, G. and Altanlar, A., Institute of Small Business and Entrepreneurship (Rake Fund), (2011), ‘An analysis of UK Regional Development Agency support on company value: evidence from Yorkshire Forward’, £11812
  4. Wilson, N., British Venture Capital Association, (2009) 'Private Equity and Insolvency Risk’, £8000

Reports by CMRC

  1. Wilson, N., (2008), An Investigation into Payment Trends and Behaviour 1997-2007, Policy Report, Department for Business Enterprise & Regulatory Reform.
  2. Department for Business, Innovation and Skills, (2012), Boosting finance options for business, Report of industry-led working group on alternative debt markets, March, URN:[12/668].
  3. BVCA Report: Wilson, N., Wright, M. and Scholes, L., (2011), Private Equity Portfolio Company Performance Through The Recession
  4. BCVA Report: Wilson, N, Wright, M and Cressy, R (2010), Private Equity and Insolvency.