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East Midlands smaller businesses see investment of £74m in strong sign of recovery in 2021

East Midlands smaller businesses see investment of £74m in strong sign of recovery in 2021

Equity investment in East Midlands smaller businesses reached £74 million by the end of 2021's third quarter, a 72% increase compared to the same period in the previous year, as revealed today by the British Business Bank’s eight annual Small Business Finance Market Report 2021/22.

The £74m investment was made across 41 deals, a 78% increase in number of deals against the previous year. With one quarter of data still to go, investment has nearly exceeded the £76m invested in the whole of 2020 in the region. Nationally, equity investment in smaller businesses surged in 2021, with figures on course to double versus the previous year.

Demand for finance in the East Midlands remains robust, with 31% of smaller businesses surveyed stating they would be happy to use finance to grow. On the supply side, 2021 saw growth in the region’s local venture capital sector, with 17 unique investors involved in venture capital now present in the region, nearly double the 9 identified in 2017.

Dr Sophie Dale-Black, Midlands UK Network Director at the British Business Bank, said:

“This report shows that following an incredibly challenging economic period for smaller businesses, they are not only coming back strong, but there is a clear appetite for growth.

“External finance will continue to play a critical role and it’s welcome to see a growing local investor presence which we know is an important driver of investment activity. Through our programmes, the British Business Bank will continue to support the country’s smaller businesses by improving access and options to secure external finance.

“There is work to be done, breaking down regional barriers to access to finance remains key to levelling up economic opportunity, which we remain committed to addressing.”

Debt markets returning to pre-pandemic levels

In addition to the growth in equity finance, the report indicates that UK debt markets overall are returning to near pre-pandemic levels. Challenger and specialist banks accounted for just over half of the bank lending market (51%) – a record share, up from 32% in 2020.

The amount of debt held by smaller businesses has significantly increased compared to pre-pandemic levels due to businesses accessing the government’s Covid-19 emergency finance schemes to help them survive. At their peak in March 2021, smaller business debt stocks were estimated to be 30% up. Encouragingly, however, debt repayments are becoming a smaller share of businesses cash flow as UK economic recovery helps boost their turnover

Half of Ethnic Minority-led businesses are open to using finance for growth

The report from the British Business Bank also looked at various factors impacting entrepreneurs’ willingness and ability to access finance. It reported that Ethnic Minority-led businesses are more open to using finance and more ambitious for business growth but access to finance remains an issue. Half (50%) of Ethnic Minority-led businesses are open to using finance for growth compared to a third (32%) of White-led businesses. More Ethnic Minority-led businesses (64%) have ambitions for significant growth compared to 39% White-led businesses.

Almost half of smaller businesses view reducing carbon emissions as a priority

In 2021, almost half (47%) of smaller businesses viewed reducing their carbon emissions or environmental impact to be a priority for their business and one in five (22%) would use external finance to help transition their business to net zero. Just over one in 10 (11%) of smaller businesses have already used external finance to support net zero actions.

The Midlands Investment Fund (MEIF) https://www.meif.co.uk/delivered by the British Business Bank which provides both debt and equity finance recently reached the milestone of more than £150m invested into small businesses across the Midlands since its launch in 2017. The milestone was reached by the Fund last month after making 702 investments in 500 businesses throughout both the West and East Midlands. An additional £251m of private sector co-investment has also been leveraged as a result of the MEIF’s support.


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