London, England - The UK's Department of Culture, Media and Sport Creative Economy Programme today published new research by Pembridge Partners and Burns Owens Partnership. The research, entitled The Financing of UK Creative Industries SMEs reveals the wide variety of financing structures used by UK creative Small- to Medium-Sized Enterprises (SMEs).
The study was based on data originally gathered from 635 UK Creative Industries SMEs using the Vital Statistics tool developed by Pembridge to help those businesses grow by understanding their strengths and weaknesses, and how they compared to their peers. A fresh analysis for this new report explored the type of finance they used, revealing that:
- Overdraft facilities were most popular (29.6%)
- 18.2% used equipment leasing / hire purchase
- 13% had equity finance
- 9.8% had long term bank loans
- 1.5% used invoice factoring
- Use of debt to finance business varies significantly between different sub-sectors in the Creative Industries.
- Use of debt to finance businesses rises significantly with the size of SMEs when size is expressed in terms of turnover
- The culture of business planning appears to be significantly different between different subsectors in the Creative Industries
- There was a distinct group of businesses apparently stuck in their growth at a turnover range around £300-400k.
One of the report's authors, Pembridge Partner Hugh Mason, said: "It seems that 'one size won't fit all' in the Creative Industries when it comes to accessing finance. We found that what SMEs need and how they access finance varies hugely. The best way we could explain that variation was to look at the profound differences in the underlying business models that operate across the sector."
Despite the wide variation they uncovered, Clayton and Mason make two central recommendations. First, they propose that greater awareness of the need for business planning in SMEs could help to
establish their credibility when seeking finance. Second, they suggest that shifting the traditional focus of public intervention in the sector away from start-ups and early stage businesses towards a group of SMEs which appear to be ‘stuck’ at a turnover range around £300-400k might offer a better return on investment.
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