By Karen Peattie
Smaller businesses in Scotland raised equity finance more than any other part of the UK outside of London last year, according to analysis from the British Business Bank, the UK Government’s economic development bank.
Figures from the bank’s annual Small Business Finance Markets report show there were 242 equity deals in Scotland in 2020, 12 per cent of the UK total. Only London, with 965 deals – 47% of the total – had more, with the south east third at 188.
However, despite the number of equity deals, Scottish businesses accessed a comparatively low share of the total investment value at just 3% – £283 million. London attracted two-thirds (66%, £5.8 billion) of equity finance, while equity investment in the south east represented 9% (£792m) and the east of England 7% (£595m).
All the same, the number of transactions is double Scotland’s proportion of UK high-growth businesses (6%), suggesting an increasing appetite for equity deals in the business community, said Mark Sterritt, UK network director for devolved nations at the British Business Bank. In 2019, equity finance deals in Scotland represented 11% of the total UK figure.
These new figures come after increased initial public offering (IPO) and crowdfunding activity in Scotland. Calnex was the first Scottish IPO in two years when it made its market debut in October, followed by AMTE Power and Parsley Box. TC BioPharm, Pawprint, and Celtic Renewables have all also completed crowdfunding campaigns in recent months.
Mr Sterritt said: “Equity finance can be a great source of funding for businesses with significant growth potential. It is encouraging to see so many smaller businesses in Scotland use it as a tool to grow their businesses, highlighting the rich ecosystem that is emerging.
“Combined with recent IPO and crowdfunding activity, the increasing number of smaller businesses raising equity finance for the first time, or opting to do so again, suggests strong opportunities and a possible changing of attitudes towards this form of funding.
“The lower value of deals in Scotland, nevertheless, suggests businesses may not be raising all the finance they need to continue on their growth journey so we continue to work to raise awareness among smaller businesses of the finance options available to them.
“Through our fund managers and finance delivery partners, the British Business Bank provides a range of programmes for smaller businesses looking at equity finance, including our Regional Angels programme and Enterprise Capital Funds. The Future Fund programme, which closed in March, has also invested £8.6m in innovative Scottish companies.
“Future Fund: Breakthrough, which will invest alongside venture capital funds into R&D intensive companies, launches this summer.”
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