Birmingham City Council invests half a million pounds in new low cost funding solution for SME suppliers
Birmingham City Council has announced that it has made a £500,000 investment in a solution that offers its small to medium sized business suppliers access to finance quickly and more cheaply than generally available.
The City Council has taken a stake in supply chain finance specialist, Obillex, which it recently appointed to provide a new supply chain finance technology platform. Birmingham, the first local authority in the UK to sign up to Obillex’s proprietary solution, has been attracted by its potential application in large buying organisations across the country and the boost it can give to local, regional and national economies.
The Obillex supply chain finance system leverages the City Council’s creditworthiness to attract funding from investors to allow rapid payment of suppliers’ invoices. The cost of the finance is kept low as investors are willing to take a small return on each transaction due to the potential high volumes involved and the low risk based on the Council’s good credit rating.
Suppliers with new or ongoing contracts with the Council are onboarded to the service simply by communicating this request through their relevant contract managers within the Corporate Procurement Services division of the City Council.
Cllr John Clancy, Leader of Birmingham City Council, said: “We recognise that SMEs are the lifeblood of the Birmingham economy so are fully supportive of anything that helps such businesses flourish.
“The product we have trialled, developed by Obillex, helps ensure our supply chain gets paid as quickly and efficiently as possible, stimulating economic growth and helping generate or protect jobs in our communities.
“Given we believe so strongly in the potential of this product for other local authorities and large corporate organisations, we are delighted the Finance Birmingham mechanism is being used to support its development and future success.”
Paul Dransfield, deputy chief executive at Birmingham City Council, added: “We appointed Obillex because we recognise the benefits their solution brings to our SME suppliers and the city and wider region by making funding more accessible and affordable.”
“On the back of this appointment, we have gone one step further by investing in the business directly as there is the potential to roll it out across other local authorities and large corporates, thereby offering the same benefits on a larger scale across the West Midlands and the UK. It means we can play a key role stimulating economic growth, helping to generate jobs in our communities. Once people see it working here in the West Midlands we believe it will attract significant interest amongst the biggest public and private sector organisations in the UK, that are proactively looking for a cost-effective way to identify and support the SMEs in their supply chains within their local communities.”
Nigel Kletz, Head of Procurement for Birmingham City Council, commented: “The Obillex Solution can work seamlessly between the finance systems of buying organisations such as Birmingham City Council and suppliers’. Significantly it will mean that an SME supplier to the Council or one of its participating contractors can simply press a button to process their invoices through a digital environment. It is an important objective for Birmingham City Council and other large buying organisations to improve supply chain liquidity and the social value benefits that arises. ”
The Council values the continuing assistance from notable strategic collaborators in Obillex such as Bank of New York Mellon.
Obillex Chief Executive Damian Crowe welcomed Birmingham City Council’s investment, “This is a hugely important commitment from the Council, and a significant recognition of the potential offered by our supply chain finance technology solution and collaborative model. It also sends out a positive statement to local people that their Council is investing in the future wellbeing of their communities by providing critical funding support for small to medium sized businesses.”
The £500,000 investment was managed by Finance Birmingham, a national provider of funding to SMEs, which is supporting Obillex as the company rolls out its platform. The investment has helped to encourage Obillex to base its business in Birmingham, and create eight new jobs in the city to date.
Sam Miller, Investment Director at Finance Birmingham, added:
“Finance Birmingham is responsible for helping SMEs along the supply chain, which need to access funding that traditional lenders won’t provide. Obillex is the perfect fit for this strategy. We have been working with the firm for several months, and will continue to support Obillex as its platform is rolled out.
“By enabling SMEs to be paid early or on time and in full, the company is creating greater liquidity amongst local firms and boosting their working capital reserves. In the West Midlands alone there is an estimated SME turnover of £128bn [Source: ONS]. Using £128bn turnover as the starting point and assuming receivables in line with the all-UK company average of 49.5 days (source: Grant Thornton, Capital Thinking issue 5), that would suggest over £17bn of cash is locked up in trade receivables across the region”. Obillex’s platform has the potential to unlock billions of this working capital into SMEs within Birmingham City Council’s supply chain – helping those firms to innovate, invest in growth and recruit more staff – making it an opportunity we could not miss.”
Birmingham has a reputation for welcoming the growth of SMEs and start-ups. It has been named the UK’s entrepreneurial hotspot, with over 18,000 new companies registering in the city during 2014 – more than any other regional location, according to StartUp Britain. The number of incubator and accelerator programmes in the city has doubled in the past two years, research by Telefonica shows.