Private debt needed to plug £450bn UK financing gap

Panellists at an event chaired by S&P's on Thursday agreed the UK mid-market was failing to fully embrace alternative lenders.

Ratings agency Standard & Poor's estimates UK mid-market companies – defined as those with revenues between £85 million and £1.3 billion – will need up to £450 billion of debt financing over the next five years.

S&P's said about two thirds of that would be needed for refinancing, with the remainder required for new financing.

Yet panelists at an event held by the company in London on Thursday unanimously agreed that such companies were failing to embrace alternative lenders, to their detriment.

“Bank deleveraging and tightening regulation are creating a scarcity of finance for many companies in Europe,” said Standard & Poor's vice president of market development EMEA Roberto Rivero. “But this scarcity is particularly acute for the so-called 'squeezed middle'.”

“Banks are not natural providers of long-term finance, but only the savvier businesses we are working with recognize this,” said Hayley Conboy, head of enterprise at the CBI. “As such, the CBI will continue to play an important role in educating businesses about alternative sources of finance.”

“It will take time for mid-market companies to get used to alternatives such as private placements,” said James Douglas, global co-head of debt advisory at Deloitte. “But until they diversify their sources of finance, some UK companies will experience funding challenges.”

S&P's launched a tool earlier this year to help evaluate mid-market companies' credit-worthiness, as many potential institutional investors in mid-market credits cite a lack of information as a barrier to investment.