£5m prize fund launched to help de-stress ‘stifled’ SMEs

FSB national chairman Mike Cherry said genuine support for small firms can 'bring something game-changing to the economy'. Picture: Contributed
FSB national chairman Mike Cherry said genuine support for small firms can 'bring something game-changing to the economy'. Picture: Contributed
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It is an irony that research has shown that one in five small business owners strike out on their own to cut stress, but one in three say dealing with business finances is their biggest source of it.

A new report claims Scottish small business growth – a key motor of the economy north of the Border – could be “stifled” because of the growing burden of financial administration and “opacity” in the market for financial products and services.

If we can support small businesses, we have the opportunity to bring something game-changing to the economy

Mike Cherry

The danger is such that a £5 million prize fund has been launched to help the creation of tools that will aid transparency and hopefully transform financial management for Scottish entrepreneurs and smaller businesses.

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Called the Open Up Challenge, it is to be run by Nesta, a global innovation foundation, with backing from the UK’s Competition & Markets Authority (CMA) and funding from eight UK banks.

The research says SMEs are spending an average of five hours a week of their personal time managing company financial matters. One in four entrepreneurs spend eight hours weekly on it. And of a subject that has vexed UK regulators trying to open up the business lending market for decades, the CMA says even a modest increase in switching business accounts could save UK SMEs about £60m over five years.

Chris Gorst, challenge prize lead at Nesta, commented: “For many Scottish small businesses financial admin is unnecessarily burdensome. There are thousands of products and services available to small businesses but no easy way for them to match these to their needs and circumstances efficiently.

“New technologies and data are creating an unprecedented opportunity to empower small businesses and the Open Up Challenge aims to uncover these, transforming small business banking by supporting innovators to build next generation services to market. It is clear that if entrepreneurs had this support then they would be freed up to focus on driving their businesses forward.”

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Simon Kirby, the economic secretary to the Treasury, said: “We want our financial services industry to be the most competitive and innovative in the world, delivering greater choice and value for customers. The Open Up Challenge will foster the creation of exciting new products and services to improve the SME banking market, and further cement the UK’s position as a global leader in open banking and digital innovation.”

The vast majority of small business owners handle their banking and finance needs alone, with 94 per cent stating that they managed all aspects, including writing and chasing invoices. The Open Up Challenge says being able to access financial products and banking services more easily could have a positive impact on small businesses, with 50 per cent of small business owners saying that being able to view and compare financial products on a comparison website would be beneficial for their business.

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The £5m prize says apps and other tools that could reduce the stress loads for SMEs could include the ability to compare loan offers based on their specific needs and financial history; analyse their transaction history to provide insights that save them time or money; move their money around automatically to where it can earn the best return or minimize charges; and help SMEs and entrepreneurs predict and manage their cashflow proactively.

Mike Cherry, national chairman of the Federation of Small Businesses, said: “Accessing the right banking products and managing finances is often seen as a complicated task for small business owners and one that takes up a disproportionate amount of their time. The Open Up Challenge has the potential to change all that. If we can genuinely support small businesses, both in terms of saving them time and providing them with access to the right financial products and services, then we have the opportunity to bring something game-changing to the economy.”

The Open Up Challenge, which will be managed by Nesta’s Challenge Prize Centre, is part of the CMA’s package of retail banking reforms announced recently. It is open to developer teams, start-ups, or established companies from anywhere in the world whose concept may be at idea stage or more advanced. The deadline for applications is 31 May.

Adam Land, senior director of remedies, business and financial analysis at the CMA, said: “With hundreds of products and offers out there, trying to research everyone to help make an informed decision takes too long for someone already very busy running a small business. We’re therefore delighted to support Nesta’s Open Up Challenge, and look forward to seeing the innovative new services and tools it inspires.”

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