A new joint study from the University of Cambridge and GLI Finance has found that lack of awareness of alternative finance options amongst the UK’s SMEs is causing a potential economic hole of as much as £20bn.

The study details how the vast majority of SMEs (80%) seek borrowing from just four UK banks, while 56% of them are unfamiliar with any forms of alternative finance. The report concludes that the government should reduce concentration risk in the credit ecosystem by launching a well-resourced awareness-raising campaign.

Since 2011, the report notes, banks have withdrawn £5.7 million a day in SME overdrafts alone, slashing available credit from £20.9bn to £12.5bn, a cut of £8.4bn. As SMEs account for 65% of net job creation in the UK, failure to increase their awareness of alternative sources of finance to fuel their growth could cost the economy £20bn by 2020, the report calculates.

The report’s co-author, Dr Louise Beaumont (Head of Public Affairs at GLI Finance), said the alternative finance industry (including peer-to-peer lender platforms and equity crowdfunding platforms) had “achieved a great deal in a short space of time”; but, she added, it was “imperative” for the Government to lead the charge for greater awareness.

She went on: “Lack of awareness amongst SMEs of the financing options available to them – despite a plethora of well-intentioned documents, reports and guides for SMEs – is an issue that threatens to undermine the UK’s economic recovery, and we call upon the Government to leverage the proven track record of the behavioural insights (aka ‘Nudge’) approach to build upon the progress made by the alternative finance industry to date.”