Report reveals increase in demand for external finance from SMEs

A report from the British Business Bank’s has revealed that SMEs in the South West received 13 per cent of all announced equity deals during the first three quarters of last year.

The total value of equity deals in the region came to £528m, a 46 per cent increase over the same period in the previous year.

The report also shows there has been a significant demand for external finance in the South West.

In 2022, 47 per cent of smaller businesses in the region sought or applied for external finance in the last three years, the second highest of any region in the UK.

Despite external finance being much sought-after by smaller businesses in the South West, only 42 per cent of small businesses used external finance in the third quarter of 2022, compared to 47 per cent the year before.

Nationally, the data reports a considerable drop. In the third quarter, only a third of smaller businesses were using external finance compared to 44 per cent 12 months earlier.

Gross lending grew despite fewer smaller businesses using finance, as they sought larger loans to support their business due to inflationary pressures.

The survey also found  that success rates for those seeking loans fell sharply from 80 per cent to 64 per cent year on year.

Although the South West’s concentration of announced equity deals increased in 2022, reaching six per cent and accounting for four per cent of all equity investment in the UK, there is still a drop from 67 per cnet of all investment in 2021.

The decrease is due to a small number of large investments made in the North West, North East and the South East.

Across the UK for overall bank lending, £35.5bn came from challenger and specialist banks in 2022, with a total 55 per cent share of the market.

The South West accounts for seven per cent of net zero-related deals and three per cent of the investment value, compared to a share of low-carbon sector turnover of just 11 per cent.

The total investment of these net zero deals reached nearly £211mn, with the South West’s 2020 low-carbon and renewable energy sector turnover at £4.7m.#

Steve Conibear, network director, South and West of England at the British Business Bank, said: “This report highlights the South West’s entrepreneurial spirit, with businesses in this region more likely to seek external finance than the national average.

“Ensuring that businesses can access the skills, support and finance is crucial to supporting economic resilience and future growth.

“The launch of our £200 million South West Investment Fund this year will increase the supply and diversity of early-stage finance for South West smaller businesses, providing funds to firms that might otherwise not receive investment and help to break down barriers in access to finance.”