European firms are too reliant on big banks, according to EY and TheCityUK

Lauren Fedor
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EY and TheCityUK say firms are too reliant on big banks. (Source: Getty)

Europe's financial stability could be at risk due to a lack of understanding about alternative forms of finance, a new report out today from EY and TheCityUK has warned.

The report argues that the scarcity of information on alternative finance not only could this hinder firms’ future growth potential, but also leave businesses exposed in the event of future economic downturns if credit supplies are constrained, or when quantitative easing ends.

EY and TheCityUK polled so-called “growth companies” for the report, finding that the majority of small and medium-sized firms were reluctant to seek alternative financing. More than half had little or no knowledge of where to source alternative finance, and two-thirds said that they intended to keep working with banks for their sole form of finance.

TheCityUK chief executive Chris Cummings said: “The European Commission’s Action Plan on CMU makes clear its intention to promote information and support for companies seeking market-based funding, but what this report underlines is the urgency that should be attached to this if Europe’s growth companies are to have the confidence to move away from sole reliance on bank financing, and a CMU is to be fully realised. “

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