The latest figures from the British Business Bank show that the UK’s SMEs were on the receiving end of £3.5bn of equity investment in 2015, an increase of 58% on the previous year.
According to the its latest report:
- Deal numbers in 2015 were 5% higher than 2014, and the amount of funding is considerably higher, increasing by 58% compared to the previous year;
- The rate at which annual deal numbers have been growing has slowed slightly, while the rate for investment amounts has increased due to larger deal sizes in 2015; and
- There has been a 71% increase in the number of equity deals above £10m in size compared to 2014, with the ten largest investments forming 25% of the total equity market
The bank’s figures show that overall equity investment annual deal numbers and investment amounts have continued to increase since 2011. In 2015 they reached 1,270 equity deals, a 5% year on year increase. The amount of funding was also considerably higher, increasing by 58% to a total value of £3.5bn in 2015.
There has also been a 71% increase in equity deals above £10m compared to 2014, with the ten largest investments forming 25% of the total equity investment for small businesses.
Positive overall but some headwinds
The overall positive picture presented by the 2015 annual figures is tempered by a slowdown in the final quarter of 2015 offsetting the strong performance seen in Q3 2015. The number of investments in Q4 2015 was 16% lower than Q1 2015. Despite this, quarterly investment totals in 2015 remain well above the final quarter figure for 2014.
However, quite what effect this will have on the broader economy is unclear: it should be pointed out that external equity finance is still only used by a very small percentage of smaller businesses, with just 1% of SMEs overall having used some form of equity finance in last three years.
Keith Morgan, CEO of British Business Bank, said their research depicts a “comprehensive picture” of the state of SME equity finance in the UK.
“It identifies a step-up in equity finance provision since 2011 but, notably, wide-ranging regional disparities persist,” said Morgan. “Although there are high-growth businesses throughout the UK, it is a concern that the regions outside London, home to 79% of these businesses, attract only 53% of the equity investment.”
Regional differences a concern
However, regional disparities remain. Not surprisingly, London and the South East still enjoy a dominant position as the leading recipient for investment.
The number of equity deals grew by 17% in 2015, with the total amount invested increasing by 100%. Putting this in context, London has the highest share of high-growth enterprises (21%) in the UK, but its share of the total number of equity deals in 2015 is much higher at 47%.
Of further concern, whilst the value of deals outside London rose by 23%, the number of deals declined by 4%. In addition, no region outside of London has seen continuous year-on-year increases in the total amount of annual investment between 2011 and 2015.