Equity investment in the South West hits £360m, according to a British Business Bank report

The South West has seen an increase in equity investment last year as the region attracts a growing number of venture capitalists, according to a report.

Equity investment in small businesses rose 145% to £360m in the first three quarters of 2021, according to figures released by the British Business Bank.

The public development bank said that with a quarter still to go, the rise meant the equivalent total of £185million seen across the whole of 2020 had already been surpassed.

This reflected the national situation, with a total of £14bn invested in small businesses across the country in the first to third quarters of 2021, compared to £6.1bn for the same period a year earlier and more than the £8.7 billion invested in the whole of 2020.

The number of deals in the South West also increased by more than 50% over the period, with the region attracting 5% of all UK equity investment deals.

The bank added that despite the surge in deals, investment was still below where it should be for small businesses, with the South West home to nearly 10% of UK small businesses.

The report found that while external funding remained heavily concentrated in London, attracting 70% over the period, the number of local venture capitalists identified in the South West doubled to 31 between 2019 and 2021 .

According to the study, less than 30% of businesses in the South West are happy to use external finance to grow, while in London this figure increases by more than 35%.

The bank said removing regional barriers to access to finance remained ‘key’ to improving economic opportunities across the UK, with plans to administer a £200m fund for businesses of the South West announced in the government’s spending review in October 2021.

Steve Conibear, UK Network Manager for South and East England at the British Business Bank, said: “As small businesses in the South West look to recovery and growth after an incredibly difficult, external funding will continue to play a vital role.

“Regional gaps in financing for growth are undoubtedly holding back our ambitious entrepreneurs and our economic opportunities. Our programs will continue to address this issue and will be further expanded with a new dedicated £200m fund for the South West.

An additional £150m for the bank’s Regional Angels Programme – which commits funds alongside other angel investors – was also announced during the spending review.

In addition to the growth in equity financing, the report says the amount of debt held by small businesses has increased significantly from pre-pandemic levels, due to companies’ access to emergency financing programs. Government Covid-19. Small business debt outstanding was estimated at 30% at its peak.

The bank found that ethnic minority-led businesses were more open to using finance and more ambitious for business growth than white-led businesses, but access to finance remained an issue.

In 2021, nearly half of small businesses considered reducing their carbon emissions or environmental impact a priority for their business, while one in five respondents said they would use external financing to help take their business to net zero emissions.

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