The Business, Innovation and Skill select committee quizzed a panel of small business funders yesterday, in an exchange which featured Funding Circle Co-Founder James Meekings. The subject of Britain’s decision to leave the EU was foremost in the minds of participants. Meekings told the committee that Funding Circle’s planned programme with the European Investment Bank (EIB) is now “very unlikely” to continue. “The programme is at risk,” said Meekings. “If I’m honest, I think that it’s very unlikely to happen now. Who knows? We obviously want it to happen.”
The EIB agreed to invest £100m into UK SMEs through the Funding Circle platform last week, alongside a £25m investment in the Funding Circle SME Income Fund from the European Investment Fund (EIF). Funding Circle has confirmed that these agreements will not be affected by the Leave vote. However, Meekings said that the initial investment was intended to form the start of a “multi-billion pound programme to get more funds into UK businesses”. It is the future of this programme which is now in doubt.
Meekings sees the British government, and the medium of the British Business Bank (BBB), as the solution. “We think during this time of uncertainty that what the British government should be doing is backing small businesses,” said Meekings. He argued that Funding Circle – and indeed other alternative finance platforms – allow for large sums of state money to be invested quickly and efficiently in small businesses. Funding Circle has received £60m in BBB money to date. Meekings is now calling for that figure to be upped.
Chris Hulatt, CFO and Founder of Octopus Investments, was also quizzed by the panel. He said that we might well also see the EIF pulling back from supporting aspiring UK venture capital funds in the wake of the Brexit vote, and that the UK government may need to step up to help plug this gap. The EIF has often acted to cornerstone VC funds in the past.
Brexit also reared its head in relation to both Funding Circle and Octopus’ workforces. Hulatt said that 30-40% of the CEOs of Octopus’ investee companies are from outside of the UK. The Leave vote casts doubt on whether such entrepreneurs will continue to gravitate towards the UK. Furthermore, he stated that 90% those investee companies’ tech teams are made up of people from the EU. Meekings said that 50% of Funding Circle’s tech team is made up of EU nationals. Both he and Hulatt called for guidance from government over this potential risk to their businesses.
The UK alternative finance sector came out strongly in favour of the Remain campaign prior to last Thursday’s vote. In the aftermath of the result, the general sentiment was one of “business as usual”, although the words “disaster” and “national economic self-harm” were also banded around by some.