First, I’ll talk about the internal and external sources of funds and the way in which businesses use those funds. External finance has become available on increasingly favourable terms for large borrowers over recent years, including because of increased competitive pressures in this market. However, for the business sector as a whole, internal funds are the key source of funding for investment.
Growth in external funding has only a weak relationship to investment. Debt funding appears to be linked to mergers and acquisitions activity, which has remained relatively modest compared with levels prior to the financial crisis. The second issue I want to discuss is the experience of entrepreneurs seeking to start or expand a small business.