Appetite for external finance grows among North West SME’s

Dr Sophie Dale-Black

More North West businesses are using external finance, according to the annual Nations and Regions Tracker, by the British Business Bank.

The report also identified Cheshire East as the centre of potential future clusters of net zero innovation.

According to the latest data, the number of smaller businesses using external finance rose slightly in the region with 44% of smaller businesses using external finance in the second quarter of 2022, up one per cent from 43% a year earlier.

The region was one of only three UK regions and nations to see a rise in the use of small business finance.

Core debt products remain the most used and widely available across the region.

The North West saw a 210% increase in the value of equity deals in 2021 to £863m, a 25% increase in the number of deals.

Quarter two 2022 data suggests that, despite the current global economic conditions, equity investment in the North West held up in the first half of the year, with deal numbers slightly above and investment seven per cent below first half 2021 levels. Initial data suggests the second half of the year will likely see a slowdown in equity markets.

The report also identified a number of potential future clusters of net zero innovation, with the Cheshire East area highlighted.

The area has attracted £175m across 12 net zero equity deals since 2011, though the majority of this was raised in a single deal, worth £150m.

Cheshire East accounts for 18% of net zero deals in the North West and 51% of the investment.

There were further signs of growth in equity finance markets beyond London, with the value of seed stage investment increased by 88% in 2021, compared with 2020.

Seed stage investment is key to building the pipeline of investable opportunities to drive larger quantities of later stage capital investment in the future and is the rocket fuel needed as businesses scale and grow.

London’s dominance of equity finance markets continued in 2021. In total, 1,286 deals worth £11.9bn took place in London in 2021, representing 66% of investment and 49% of deals in the UK. The North West’s share of equity investment stood at six per cent of investment and five per cent of deals in 2021.

Businesses in the most deprived areas show greater ambition for growth.

Dr Sophie Dale-Black, UK network director for the North of England at the British Business Bank, said: “The British Business Bank is committed to reducing regional imbalances in access to finance.

“We are seeing promising signs in the North West’s equity finance markets and data suggests equity investment overall in the UK is holding up in the first half of the year.

“It is encouraging to see evidence of a potential net zero cluster of investment emerging in the North West, which is already known as a hotbed of innovation and technology.”

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