SMEs and UK growth: the opportunity for regional economies. November 2018

1 SMEs and UK growth: the opportunity for regional economies November 2018

2 Table of contents FOREWORD 3 1: INTRODUCTION 4 2: EXECUTIVE SUMMARY 5 3: SMES AND UK REGIONAL GROWTH 7 Contribution of SMEs to employment and wealth creation 5 Role of SMEs in stimulating innovation and productivity growth 9 Challenges facing SMEs 9 Business survey findings 10 Future scenarios 11 Scenario 1 13 Scenario 2 14 Conclusions 16

3 Foreword Small and medium sized enterprises (SMEs) are central to the success of the UK economy, contributing around 60 percent of all jobs and more than half of all turnover of the private sector in the UK. Helping SMEs grow will boost growth and deliver new jobs in all areas of the country. Santander has a presence across the UK. We deliver banking services to over fourteen million people in the UK and are an ambitious challenger in the business banking market. This means that we are committed to supporting the growth of SMEs and the impact that they have on providing new employment opportunities that support household incomes in all areas of the UK. We have worked with the economic research consultancy Development Economics and the market research company ComRes to help us to build our understanding of the importance of the SME market to the UK economy and what role the banking sector could play in helping SMEs to grow. We have focused on how the banking sector can help in delivering a rebalanced economy by supporting SME growth in areas of the country where employment and business growth has been weaker. Santander supports the growth of SMEs through the provision of banking services and providing access to credit to help business invest to grow and manage their cash flows. Our support, however, goes beyond the provision of bank accounts and credit to include support and advice on business growth. Most importantly, our nationwide network of relationship mangers means that we understand the needs of our customers. This has helped us to appreciate the challenges they face and the support they need to help their businesses break through barriers to growth. issues such as access to talent, building business networks to allow SMEs to learn from each other s experience and supporting first time exporters. The research we have supported has shown that there are significant regional variations in the importance of SMEs to regional economies. In areas like Wales, South West England and Northern Ireland SMEs currently account for 70 percent of all private sector jobs. Business growth and business creation is however, stronger in areas such as London and the South East and major cities like Manchester and Birmingham. Our research has highlighted that a small proportion of fast-growing SMEs are driving much of the innovation and growth in the UK economy. There is a major and growing subset of SMEs who appear to have no appetite for external finance and would prefer to grow more slowly than borrow to grow more quickly. Supporting just a small proportion of those SMEs to access finance and boost their growth would have a significant positive impact on the UK economy. The banking sector should consider what more can be done to ensure that we have both the products and the strength of relationships to give SMEs more confidence to consider using external financing. Policymakers should consider how changes to the banking market can encourage the delivery of these changes. Greater competition will give SMEs more choice. We hope that this research will help to contribute to a better understanding of the role SMEs play in the UK and how the banking sector and policymakers can work together to help them do even more to deliver growth for the whole of the UK. Our support to growing businesses through our Breakthrough programme, includes assistance with

4 1: Introduction The purpose of this study is to assess the importance of SMEs to the UK economy in general and individual regions in particular. The report considers the relationship between SMEs and regional growth, the impact of constraints on SME growth and develops alternative future scenarios that assess the extent to which SMEs could contribute even more to the economy in terms of job creation and the generation of economic output.

5 2: Executive Summary Job creation: SMEs generate a large portion of jobs in UK. We found that they contribute around 60% of all jobs and 51% of all turnover generated by the private sector and are particularly important to the economies of South West England, Wales and Northern Ireland, where they account for over 70% of all private sector jobs. Since 2011, just over 70% of all new jobs created across the entirety of the UK economy have been created by SMEs. The importance of SMEs in creating jobs has been particularly notable in the largest cities, such as London, Birmingham and Manchester. Over the past five years SMEs have created over two million jobs for the UK economy. Productivity: Apart from their contributions in generating jobs and Gross Value Added (GVA) the measure of goods and services produced in an area, industry or sector the OECD has shown that SMEs help advanced economies develop and adopt new technologies and other forms of innovation, which lead to productivity increases. SMEs operating in highvalue added sectors such as Professional Services and Information & Communications Services are also a key component of the UK s growing knowledge-economy, with knowledge clusters in London and major regional centres, such as Manchester and Birmingham, playing an increasingly important role. Competition: The diminished trust and confidence that many SMEs appear to place in their own bank and/ or the business banking sector more generally could be mitigated if the SME banking market was subject to more competition, with the more even distribution of business banking services to support the growth of small businesses across the UK, rather than just in metropolitan centres. Alternative scenarios: The report considers two alternative scenarios for the future economic contributions of SMEs in the UK under a range of different assumptions about future constraints on growth and demand and supply conditions for business credit. Scenario 1 looks at the potential growth for UK SMEs given the current economic landscape, whereas scenario 2 looks at the potential effects of more competition in the business banking market, which would be delivered by an extensive UK-wide network. The findings show that, by 2023, UK SMEs could be generating much more growth, worth around 23 billion per annum (above annual levels expected under the business-as-usual scenario). SMEs would also have the potential to support employment amounting to an additional 157,000 jobs by 2023 compared to employment levels expected under the business as usual scenario. 1 Constraints to growth: SMEs are currently responsible for generating around 43% of national economic output. A review of background literature and the results of a new business survey commissioned for this report by Santander both identify that SMEs could be contributing even more than they do already to the UK economy. However, they face a series of growth constraints, including access to and appetite for credit to fuel growth. Reluctance to borrow: There is also evidence in the research that an increasing proportion of UK SMEs can be regarded as permanent non-borrowers, meaning that a large number would rather grow more slowly than borrow to invest to grow more quickly. 1 2017 prices

6 Under the second scenario there would be expected to be significant rebalancing of UK growth, particularly in employment, from London and the South East to the UK regions. For example, under the second scenario, there would be expected to be an additional 16,000 jobs created by SMEs by 2023 in North West England compared to the anticipated situation under the first scenario. Other examples of the regional boost to employment growth attributable to SMEs expected by 2023 under the second scenario include: an extra 14,000 jobs in South West England; Rebalancing UK growth: Under the second scenario, the expected increase of GVA occurring outside of the Greater South East by 2023 would amount to an increase of 11.6 billion, compared to about 11.4 billion in London, the South East and the East of England. This means that the Rest of the UK is expected to provide 51% of the GVA boost compared to 49% in the Greater South East. The second scenario would therefore be expected to provide significant progress towards rebalancing growth across the UK, by delivering stronger growth outside the Greater South East. 10,000 additional jobs in Scotland; 6,000 extra jobs in Wales; and 3,000 extra jobs in Northern Ireland. In addition, under the second scenario we could expect additional economic output worth 23 billion per annum generated annually by 2023 at a national level. For North West England, the expected increase in the size of the regional economy is expected to amount to over 2.6 billion per annum Other expected increases include: increase annual GVA in South West England by 1.8 billion per annum or 3.6%. additional GVA in Scotland worth nearly 1.4 billion per annum or 3.1%. extra GVA worth 0.67 billion per annum in Wales or 3.1% 0.46 billion per annum in Northern Ireland or 2.4%.

7 3: SMEs and UK Regional Growth Contribution of SMEs to employment and wealth creation The standard definition of an SME is any business with fewer than 250 employees. The most recent data from the Government (Office for National Statistics, ONS) is that at the start of 2017 there were just under 5.7 million such businesses in the UK. The latest data also confirms that SMEs contribute around 60% of all jobs which amounts to 51% of all turnover generated by the private sector in the UK. Moreover, ONS data also shows that the contribution of SMEs is growing in importance. Since 2011, just over 70% of all of the net new jobs created across the entirety of the UK economy have been created by SMEs. However, SMEs are not equally important for all sectors of the UK economy. For example, in terms of the provision of jobs, SMEs are of above-average importance to sectors such as Professional Services, Construction, Property Services and Agriculture. On the other hand, SMEs are of below-average importance for employment in sectors such as Financial Services and Retail Distribution. There are also differences in terms of regional patterns of SME contributions. When it comes to employment creation, SMEs are particularly vital to the economies of South West England, Wales and Northern Ireland, where they currently account for over 70% of all private sector jobs. When contributions to economic output, or GVA, are considered, the importance of SMEs to the London economy is especially notable: in the capital, around 54% of overall economic output is attributable to the activities of SMEs. 2 The above-average importance of SMEs to the creation of wealth in the UK s largest cities is also evident in places such as Manchester and Birmingham. This is because larger cities are particularly important locations for knowledge-intensive economic activities such as Professional Services and Information & Communications industries. The evidence also suggests that there are above-average concentrations of SMEs in these high-value sectors, especially in larger cities. Similarly, SMEs play an especially important role in the UK s high-value clusters. Business clusters are dynamic networks of inter-connected companies or organisations operating within specific sectors and in close proximity. Such clusters are also seen by a high volume of productive interactions between firms of different sizes, where creative and professional people meet, exchange ideas, and develop innovative products or processes. Such interactions often lead to the formation of new joint ventures or business enterprises (i.e. new SMEs) between different organisations operating in the cluster. 2 This statistic excludes the contribution of the Financial Services sector as data is not available from the Office for National Statistics.

8 Since 2012 it is estimated that SMEs have been responsible for net employment growth amounting to just over 2 million jobs across the UK. The largest proportion (355,000 jobs, about 18% of the total) occurred in Professional Services, but other sectors such as Accommodation & Food Services (292,000 jobs, 14.5%) and Business Support Services (238,000 jobs, 11.8%) were also important. SMEs contribution to employment SMEs contribution to business turnover 824bn 8.7m 10.5m 1,834bn 540bn 4m 3.2m 541bn Micro (0-9) Small (10-49) Medium (50-249) Large (250+) Micro (0-9) Small (10-49) Medium (50-249) Large (250+) The strongest area for net job growth attributable to SMEs was London with 527,000 jobs created, 26% of the total. South East England contributed a further 304,000 jobs (15% of the total). Another important aspect of the UK s SME landscape is the extent to which new businesses are established. Data on business start-up rates are gathered annually by the ONS: the data reveals that in 2016, just over 414,000 new businesses started across the UK. Of these, slightly over 102,000 nearly a quarter were founded in London. Furthermore, when considered on a per capita basis (i.e. taking into account the relative sizes of each region s economy), by far the highest regional business start-up rate is found in London, where the rate of formation is over 71% higher than the overall UK average start up rate. On the other hand, the start-up rate in Northern Ireland is only about half the UK average, and start up rates in Wales, Scotland and North East England are also much lower than the national average. Apart from the importance of London as a hot-bed for new business formation, on a sub-regional basis it is also notable that larger cities in the various regions (such as Manchester, Birmingham, Southampton and Leicester) are also important centres for new business creation, with each possessing a level of per capita entrepreneurship that is much higher than their respective regional averages, with the rates also comparing well with the national average.

9 Role of SMEs in stimulating innovation and productivity growth As well as their contributions to generating jobs and GVA, SMEs are shown to play a role in helping advanced economies develop and adopt new technologies and other forms of innovation and productivity increases. They contribute directly through their above-average levels of activity in sectors such as Professional Services and Information industries, and indirectly through increased competitive pressure on larger and other incumbent firms. However, it has been estimated that of the 5.7 million SMEs in the UK, the number of high growth small businesses defined as businesses that employ more than 10 people and which experience more than 20% growth in employee numbers over a minimum of three years amounts to only around 1% of this population, i.e. around 10,000 businesses in total. 3 This suggests that only a very small proportion of the overall SME population is driving much of the innovation and growth occurring in the UK economy. Challenges facing SMEs Various reports have found constraints on the more ambitious UK SMEs in achieving their growth potential. For example, the Scale-Up Report commissioned by the UK Government and published in 2014 identified four key constraints: (1) Leadership challenges; (2) access to talent and skills; (3) constrained access to capital; and (4) internationalisation and innovation challenges. Following this, an important theme of this report is on the third of these: access to finance. Although there has been a marked improvement compared to the restrictive conditions between 2008 and 2012, nevertheless, problems remain. For example, the SME Finance Monitor (September 2018) indicates that there has been a significant increase (compared to 2011) in the proportion of SMEs in the UK that can be identified as permanent non-borrowers, meaning they appear to have no appetite for external finance. 4 Furthermore, responses to the Monitor s questionnaire revealed that nearly three-quarters (73%) of SMEs interviewed said that they would rather grow more slowly than borrow to grow more quickly. This pattern may be related to a general lack of trust in the banking sector. We found that 1 in 10 SMEs do not have confidence in their own bank, and over twofifths of SMEs report a lack of trust in the banking sector. However, despite this, most SMEs do have trust in their bank. 3 Enterprise Research Centre (2016), The UK s Productivity Challenge, pages 14-15 4 BDRC, SME Finance Monitor 2018Q2, September 2018. The SME Finance Monitor is based on a quarterly survey of 4,500 UK SMEs and has been running since 2011.

10 Business survey findings o explore growth constraints a bit further, a new survey of 1,200 UK SME business owners and decision makers with fieldwork was undertaken by ComRes during September 2018. When asked about the main barriers to business growth, SMEs were most likely to report the competitiveness of their sector (31%), uncertainty surrounding Brexit (29%), and a perception that the market within which they operate is not growing (18%). Access to investment for expansion was cited by only 10% of SMEs as being a barrier to business growth. Other (6.2%) We don't experience any barriers to growth (18.4%) Lack of access to technology (3%) Infrastructure problems (4.5%) Advice and support about how to export (1.8%) Advice and support about how to grow the business (6.3%) Access to investment for expansion (10.1%) What are the main barriers to your business growing? Sector is highly competitive (30.8%) Uncertainty about Brexit (29.4%) The market in my sector isn t growing (17.8%) Uncertainty about a change of government (12%) Difficulties in employing people with the right skills (15.5%) Taxes or government regulation (16%) In addition, one-in-five (19%) of respondents said that their business had experienced serious financial difficulties at some stage. Of those SMEs that had experienced times of financial difficulty, three in ten (29%) reported that their business bank was overall unsupportive during this time, while two in five (39%) said that the bank was supportive. Among those SMEs who anticipate growing significantly in the next 12 months, more than a third (37%) say that their bank has been unable to provide the help they needed to grow quickly, while 23% said that their business bank has been able to help a little.

11 Fast-growth Business Survey Results: 37% 23% 34% say that their bank has been unable to provide any help they needed to grow quickly said that their business bank has been able to help a little of SMEs reported that they would like their bank to offer more help to enable them to grow more quickly Additionally, around one-third (34%) of SMEs reported that they would like their bank to offer more help to enable them to grow more quickly. Future scenarios The report considers two alternative scenarios for the future economic contributions of SMEs in the UK, through a range of different assumptions about future constraints on growth and demand and supply conditions for business credit. The timeframe for the scenarios is 2018-2023. The first scenario, the Reference Case, assumes that investment by UK SMEs continue along their recent and currently forecast short-to-medium term future trajectories. The Reference Case scenario essentially assumes business as usual carries on among UK SMEs. It assumes that business credit demand and supply conditions continue to operate at levels similar to those prevailing in 2017-2018. The second scenario Enhanced SME Growth assumes that the existing national provision of Financial Services to the UK s SMEs is supplemented by the entry of a new national full-service provider delivered through a national branch network that would provide enhanced levels of business banking services to SMEs across all UK regions.

12 Examples of the types of financial services that could be offered to SMEs across all UK regions under the second scenario might include the following: Easier access to tools enabling improved cash flow management; Enhanced integration of business banking with clients accounting software; Access to a national banking relationship management network; Enhanced business current account functionality; Improved access to growth finance; and Full access to trade-related banking services, such as improved access to trade finance and foreign exchange services. The provision of improved service offering on the part of a new entrant might also be expected to result in incumbent service providers enhancing their own service offerings, thereby producing a sector-wide improvement in financial services provided to UK SMEs. We expect that the provision of an enhanced range of Financial Services to SMEs through a regional branch network under the second scenario would help address a number of supply and demand side constraints that influence the appetite for credit among the UK s small and medium-sized businesses. For example, it would help address the reluctance of many SMEs to consider bank lending to fuel future growth and reduce the proportion of SMEs that are permanent non-borrowers, as well as help to decrease the proportion of SMEs who say that they would rather grow more slowly than borrow to grow. The entry of a new full-service business banking provider with national scale and infrastructure would also deliver better rates of investment on the part of growth-orientated SMEs by unlocking and/or accelerating investment decisions that are being held up by constrained access to finance. It could also help to lift SME growth rates by improving rates of access to new markets, particularly export markets for goods and services produced by SMEs. It is also likely to enhance SME productivity by improving the efficiency of internal processes and management of resources through more accurate information and access to enhanced software and business management tools.

13 Scenario 1 Under the Reference Case scenario, annual GVA from UK SMEs is expected to grow by about 66.7 billion per annum by 2023 in real terms, to about 758 billion annually. 5 This is an increase of 9.7% in real terms compared to the position at the start of 2017. About 43% of this increase is expected to come from two sectors: Professional Services and Business Support Services. About 56% of growth is expected to occur in London, the South East and the East of England. Furthermore, under Scenario 1, employment contributions by SMEs by 2023 would be expected to increase by 682,000 jobs compared to 2017 levels. Overall SME employment contribution would be expected to reach 16.827 million jobs by 2023, which is a 4.2% increase compared to the 2017 baseline position. The largest shares of this growth would be expected to come from Professional Services, Business Support Services, Information & Communications, and Accommodation & Food services. Around 50% of growth is expected to take place in London, the South East and the East of England. Of that growth London is expected to contribute around 24% of overall growth (165,000 of the total expected UK increase of 682,000 jobs). A further 14.9% is expected to be contributed by the South East (102,000 jobs) and 11.5% is expected to be contributed by the East of England (78,000 jobs). Scenario 2 Although the contributions of SMEs under Scenario 1 would be large and important, they are less than could be delivered if growth constraints were addressed. This is what Scenario 2 aims to offer, and through this shows the potential to rebalance UK economic growth, with stronger SME growth in the UK regions other than London and the Greater South East. Overall, under Scenario 2 annual GVA attributable to UK SMEs is expected to grow by about 89.7 billion per annum in real terms by 2023, to just under 781 billion. This is an increase of 13.0% in real terms compared to the 2017 position. The overall annual increase in GVA generated by SMEs under Scenario 2 by 2023 amounts to about 89.7 billion per annum This compares to an increase of 66.7 billion by 2023 predicted under Scenario 1. The increase in annual GVA delivered by SMEs under Scenario 2 by 2023 is about 23.0 billion per annum greater than under Scenario 1, which is an uplift of around 3.0%. The predicted GVA results for 2023 under Scenario 2 show a stronger comparative performance of the North of England, South West England and also of Wales, Scotland and Northern Ireland. For example, whereas the national increase in GVA per annum expected under Scenario 2 (compared to Scenario 1) is 3.0%, for South West England the anticipated increase is 3.6%, and for the North East the increase is 3.5%. In the case of Northern Ireland, the annual increase in GVA is expected to amount to 465 million per annum by 2023, which is an increase of 2.9% compared to Scenario 1. 5 Due to the lack of available baseline GVA data, this prediction excludes the potential contribution from SMEs operating in the financial services sector

14 Turning next to employment, under Scenario 2 the predicted aggregate SME employment levels across the UK would be expected to reach 16.98 million by 2023, an increase of 839,000 jobs compared to the 2017 baseline position. This represents a 5.2% increase compared to the 2017 baseline. By comparison, under Scenario 1 the 2023 employment level is predicted to increase by 682,000, so Scenario 2 is expected to deliver an uplift in jobs amounting to 157,000 in total. The largest sectoral contributions to the predicted uplift of 157,000 jobs by 2023 (when Scenario 2 is compared to Scenario 1) are anticipated from Professional Services (about 23% of the total); Business Support Services (16%); the Hospitality sector (11%) and Information & Communications (also 11%). Although the Greater South East (including London) is still expected to be the dominant driver of SME employment growth, its proportion of total growth would be slightly lower. In contrast the contributions of regions in the North of England, and also from the Wales, Scotland and Northern Ireland is also expanded under the second scenario. We see that under Scenario 2 London provides about 21% of SME jobs growth. Lower than the nearly 24% under Scenario 1. Northern Ireland, on the other hand, would be expected to gain an extra 3,000 jobs under Scenario 2 compared to Scenario 1. Under the second scenario, Northern Ireland would provide 1.7% of the overall national gain in employment expected under this scenario, which is an increase compared to the 1.5% anticipated under Scenario 1.

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16 Conclusions SMEs are a vital source of jobs and economic output for the UK economy, especially in knowledge intensive sectors such as Professional Services, and Information & Communications Services. They are also important sources of innovation and productivity growth throughout the economy, both directly and indirectly through emulation and competitive effects on larger players in key industries. However, there is consistent evidence that growth-orientated SMEs are constrained in achieving their potential through limited access to credit and other forms of support from their bank. There is also evidence that an increasing proportion of SMEs are reluctant to borrow and would rather constrain their growth rather than take on borrowing. If just a portion of these business had access to products and support from their banks which would give them more confidence to borrow the impact on SME growth rates would be significant. The diminished trust and confidence that many SMEs appear to place in their own bank and/or the business banking sector more generally could be mitigated if the SME banking market was subject to more competition, with the more even distribution of business banking services to support the growth of small businesses across the UK. Scenarios developed for this study that have explored the potential effects of enhanced competition in the business banking market through an extensive UK-wide network has identified that, by 2023, UK SMEs could be: generating additional annual economic output (GVA) worth around 23 billion per annum (2017 prices) over and above annual levels expected under the business-as-usual scenario; and supporting additional direct employment amounting to an additional 157,000 jobs by 2023 compared to employment levels expected under the business as usual scenario. The scenario results show that the removal of barriers to growth and an increase in the quality of business banking support for small businesses in regional areas will have significant benefits for regional economies. Indeed, this study shows a proportionate reweighting of UK growth from London to the UK regions. Enhanced competition in business banking services is expected to produce both an increased supply of business finance products to SMEs, and also to boost the appetite for finance to stimulate growth amongst SMEs that are currently reluctant to borrow to fuel growth. In terms of regional competitiveness and economic outcomes, this could be seen in the following: Under the second scenario, a significant uplift would be expected (compared to the Reference Case scenario 1) in levels of business turnover generated by SMEs in areas such as the North of England and in the South West. An improved level of aggregate business revenue performance is also expected among SMEs located in Wales, Scotland and Northern Ireland. The contributions of SMEs located in the same areas towards economic output (GVA) is expected to be stronger under the second scenario.

17 The increase in SME business turnover and associated GVA under the second scenario would be expected because of the enhanced availability and improved take-up of financial products and services by a larger number of SMEs that have higher growth potential and above-average growth ambition. This would be delivered through an extensive fullservice branch network covering all nations of the UK and associated investment in client relationship methods that would be expected to help increase the appetite for financial products to fuel otherwise unrealized growth potential. Although London and the South East are expected to continue to enjoy the greatest share of job growth under the second scenario, the comparative performance of the more peripheral regions is expected to be significantly improved by enhanced competition for the provision of banking services to SMEs. Under the second scenario, the relative shares of overall employment expected to accrue to regions such as Northern Ireland, Wales, South West England are all greater than is the case under a Reference Case scenario where levels of competition in the business banking sector remain unchanged. Under the second scenario, there would be expected to be an additional 16,000 jobs created by SMEs by 2023 in North West England compared to the anticipated situation under the first scenario. Other examples of the regional boost to employment growth attributable to SMEs expected by 2023 under the second scenario include: an extra 14,000 jobs in South West England; 10,000 additional jobs in Scotland; 6,000 extra jobs in Wales; and 3,000 extra jobs in Northern Ireland.

18 In addition, under the second scenario there would also be expected to be additional economic output worth 23 billion per annum generated annually by 2023 at a national level. For North West England, the expected increase in the size of the regional economy is expected to amount to over 2.6 billion per annum Other expected increases include: a boost to annual GVA in South West England worth over 1.8 billion per annum. additional GVA in Scotland worth nearly 1.4 billion per annum. extra GVA worth 0.67 billion per annum in Wales and 0.46 billion per annum in Northern Ireland. a stimulus for the re-balancing of the future performance of the UK s regions. SMEs and UK growth: The opportunity for regional economies Scotland 1.90% 1.36% 0.77% 0.61% North East 1.73% 1.26% 0.65% 0.51% North West 1.80% 1.32% 0.71% 0.57% Yorkshire & Humber 1.77% 1.30% 0.69% 0.55% Nothern Ireland 1.84% 1.25% 0.62% 0.50% East Midlands 1.62% 1.30% 0.67% 0.55% West Midlands 1.65% 1.32% 0.69% 0.57% East 1.84% 1.46% 0.86% 0.71% Wales 1.83% 1.33% 0.73% 0.58% London 1.94% 1.56% 0.95% 0.81% South West 1.70% 1.22% 0.61% 0.47% South East 1.73% 1.39% 0.76% 0.64% Current projections A more competitive business banking market

19 Specifically, under the second scenario, the expected increase is GVA occurring outside of the Greater South East by 2023 would amounts to an increase of 11.6 billion, compared to about 11.4 billion in London, the South East and the East of England. This means that the Rest of the UK is expected to provide 51% of the GVA boost compared to 49% in the Greater South East. The second scenario, therefore, would provide significant progress towards rebalancing, as under Scenario 1 the latter area accounts for 51% of the overall GVA expected to be produced by the UK during 2023 under that scenario. Therefore, the provision of additional competition in business banking services to SMEs would be expected to provide a significant boost to regional economic competitiveness, and as such would constitute a stimulus for the re-balancing of the future performance of the UK s regions.

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