Development bank leader calls on investors to support NPIFII

British Business Bank chief executive Louis Taylor called on investors to boost regional investment by working alongside the second round of Northern Powerhouse Investment Fund.

Speaking after the launch of the £660m fund, which aims to provide funding for SMEs in Yorkshire and Humber, the North West, and the North East, Taylor said the fund’s success looked like “proportionately more private sector crowded in alongside us. And it looks like a genuinely catalytic impact on the investor community. We encourage them to be more active in the regions.

“So it’s fine for us to bring the money here. But we shouldn’t own the market. We should be encouraging others to come in alongside us get the flywheel going without the need for government involvement.”

The first round of the fund saw £456m invested in 1,300 SMEs, creating more than 8,600 jobs. It also helped secure more than £670m in private sector leverage.

The second round of the fund is part of a £1.6bn investment plan for the regions outside London and the South East.

In a keynote address at the fund’s launch in Leeds, Kevin Hollinrake MP, minister for enterprise, markets and small business, urged SMEs to take advantage of the fund.

“There is no private enterprise without capital investment,” he said. “It’s hugely important, what we’re talking about today. I will say that private investment isn’t just about supply side – and this is a really important boost to the supply side – it’s also about the demand side. One of the worried I have when I look at the statistics is that 80% of businesses in the UKL would rather grow more slowly than borrow.

“There is real concern about that. It’s important to rebuild the confidence between the finance sector and the world of business.”

He acknowledged the investment imbalance between London and the regions. “Everyone in this room knows Northern England has more than its fair share of business talents, and a superb track record of innovation. We also know that on a like for like basis, the probability of getting any equity funding is up to 50% lower outside London, and deal values can be up to 40% lower.

“It’s well known that investors prefer to invest in their home regions, and the number of investments that make decreases with distance. That’s very understandable behaviour. It’s also a vicious circle.  The more deals that are made in London, the greater the call becomes for businesses to relocate to where investors are based. But it doesn’t have to be that way. Our vision is of a country where investors are willing to back great ideas in every part of the United Kingdom. The Northern Powerhouse Investment Fund has helped us make that vision a reality.”

The Yorkshire and Humber portion of the fund will see Mercia offer SMEs debt finance  between £100,000 and £2m, and equity finance of up to £5m, with Business Enterprise Fund (BEF) delivering smaller loans between £25,000 and £100,000.

“he North has always been at the heart of innovation,” Taylor said. “The commitment to drive ingenuity of northern entrepreneurs has earnt the region a very justified reputation for resilience and transformation. It’s what we’ve been seeing for the past seven years – businesses creating new solutions for old problems, in perspectives, new ideas, new technologies and new jobs.”