SCOTTISH businesses are moving away from their traditional reliance on banks, with many planning to issue shares to raise money, a survey has revealed.
As the effect of the credit crunch on banks' ability to lend becomes apparent, Scottish owner-managed businesses (OMBs) are planning to raise more capital by issuing stocks.
Last night representatives of Scotland's small firms claimed trust betwe
en some companies and banks had broken down.
According to the survey by accountancy group Baker Tilly, 20 per cent of OMBs, often family-run, now plan to raise more capital by issuing shares. That figure compares with a UK average of 10 per cent.
Baker Tilly says the results contrast sharply with previous practice north of the Border, where a third of OMBs own more than 50 per cent of their business.
That determination to retain control of companies compares to the notably lower UK average of 24 per cent owning more than half of their firms.
Andy Baker, a corporate finance partner at Baker Tilly, said: "Scottish companies appear to be at a crossroads between a historical cultural preference for debt funding and a growing acceptance of equity investment, which in the past has been perceived as 'giving away' equity."
Baker Tilly said the move by Scottish business might be a positive as the previous dependence on bank debt may have been "a contributing factor in the stifling of the growth of the next generation of wealth creators and mass employers".
It added: "It could be that the restriction of credit is forcing a move towards private equity and potentially public markets that could represent a new opportunity for the Scottish economy."
Baker Tilly claimed the previous "aggressive" lending policies of Royal Bank of Scotland and Bank of Scotland, both now more conservatively run and partly taxpayer-owned, may have contributed to the Scottish preference for bank debt.
The findings are part of a survey of 300 directors of companies across a range of sectors in eight UK nations and regions, all with a turnover of between £5 million and £50m.
A total of 28 per cent of Scottish respondents, more than any region of the UK, said they planned to increase their firm's debt level. That compared with a UK average of 19 per cent.
Colin Borland, a spokesman for the Federation of Small Business in Scotland, said:
"This (survey] doesn't surprise me as the first three months of this year were also very difficult for SMEs.
"A lot of members had a key relationship with their bank. But with the credit crunch that trust sometimes broke down."
Another finding of the soon-to-be-released survey is that more Scottish OMBs saw competition from lower cost competitors abroad as a threat to profitability compared to other UK respondents – 30 per cent against a 20 per cent average.
But the Scots businesses also had more overseas ambitions than average – 33 per cent saying they wished to set up a presence abroad compared with the 21 per cent UK average. "That's the positive flip-side of the coin of fear, it seems," Baker said.
