Research project
Business Finance Forecasting & Policy Modelling (BEIS)
- Start date: April 2022
- End date: January 2023
- Funder: Economic and Social Research Council (ESRC)
- Principal investigator: Professor Nicholas Wilson
- External co-investigators: Professor Marc Cowling (Oxford Brookes University), Professor Paul Nightingale (University of Sussex). Postgraduate student: Dr Marek Kacer.
Description
The Business Energy and Industrial Strategy Department needed to improve its capability to model SME debt and equity finance markets, policies and future interventions. Covid-19 had exposed gaps in evidence and ability to provide rapid advice to ministers - including both on the nature of structural and cyclical market problems and policies needed. The current research project was initiated to fill these gaps in the evidence by rigorous analysis of detailed data on lending activity to the SME and corporate sector and its impact on innovation, growth and productivity across UK regions.
The project is split into two phases. The first phase of the project focused on the analysis of the costs and impacts of Government supported business interruption loan schemes (e.g. Enterprise Finance Guarantees, COVID schemes, CBILS and BBLS) and future successor loan guarantee schemes in the UK. Phase II continues this analysis and includes analyses of the recovery loan schemes and the British Business Banks (BBB) Equity Finance Schemes (e.g. regional investments and Future Fund). The project teams’ analysis and policy toolkit allow the government to make dynamic comparisons between the BBB’s different policy interventions on the lending side. As well as the provision of methodologies to better understand the public spending trade-offs involved in allocating capital amongst these various interventions, it will also offer some practical illustrations of where BEIS and BBB programmes are currently positioned on these trade-offs - to provide a better understanding of how to deliver the right policy combinations.
The research has a particular focus on important new sectors such as ‘Deep Tech’, ‘Life Sciences’, ‘CleanTech’, ‘Financial Technology’ and important themes such as de-carbonisation (net zero), sustainable growth and regional policy (‘levelling-up).
Impact
Influences government policy interventions on business access to debt, equity and growth finance and the consequent impact of growth and innovation. Research findings will be aligned with the impact objectives of CMRC. Currently, the UK Government has prioritised four strategic objectives:
- the UK’s productivity problems, to fix the decline in productivity growth since 2007.
- the “levelling up” agenda, to address the uneven geographic distribution of economic activity, which is overly concentrated within London and the South East,
- to quickly recover from the pandemic and ‘build back better’ so the UK is better placed to address its future challenges, and
- to decarbonise the UK economy and hit the new legally binding carbon targets.