SCOTLAND is outperforming the rest of the UK in attracting investment to its university spinout companies, new figures show.

The British Business Bank, the UK government’s economic development bank, says small businesses founded at Scottish universities accounted for the highest number of equity investment deals to UK spinouts last year.

Of the 211 equity deals in 2021 involving spinouts across the UK, 44 of them – just over a fifth of the total – came from Scottish academic institutions.

This is the “highest figure of any region or devolved nation,” the British Business Bank said.

Scotland’s total outperforms the South East of England, in second place, with 39 spinouts receiving funding. The East of England and London were in third and fourth place, with 35 and 32 spinouts respectively receiving investment.

“Scotland is home to a number of world-class research institutions that are developing ground-breaking products and processes,” said Barry McCulloch, who is senior manager for Scotland in the British Business Bank’s UK Network team.

Sectors like life sciences and technology were particularly attractive to investors, McCulloch said.

Access to finance was helping entrepreneurs “turn research concepts into commercial ideas,” he added.

Last year was the second year in a row that Scotland has topped this table, the British Business Bank said.

In 2020, 64 Scottish university spin outs received funding, ahead of the South East of England and East of England, with 41 deals each.

Scottish spinouts have continued to raise funding into 2022. In the first half of the year, deals announced include an £8 million investment in Elasmogen, a biotechnology business spun out from the University of Aberdeen.

WellFish Diagnostics, an aquaculture spinout from the University of the West of Scotland, also raised £1.2m.

Scotland produces high volumes of spinout companies because of its “world-leading research capability,” the British Business Bank said.

But on average, Scottish companies raise less funding than their counterparts based in the so-called ‘Golden Triangle’ of London, Oxford and Cambridge.

The average value of Scottish spinout investments is £10m. This is lower than the £17m average of Golden Triangle investments – though still higher than any other region beyond this area.

An analysis of more than 2,300 spinout companies associated with research grants from UK Research and Innovation (UKRI), the UK’s biggest public funder of research and innovation, also suggests further untapped potential in Scotland.

Only 14% of these spinout companies – 331 of the 2,306 analysed, emerged from institutions in Scotland.

“Even with the existing strength of the equity ecosystem for Scottish spinouts, this latest research shows there is room for further growth,” the British Business Bank said.

The data is published in a study by the British Business Bank and UKRI called Backing innovation-led businesses: the role of public investment.

The partners say their analysis shows that university spinouts they have funded alongside Innovate UK, the UK’s innovation agency, have “better business and employment outcomes.”

The British Business Bank works with partners including high street banks to help small businesses access finance. As of March 2021, its programmes had helped almost 95,000 smaller businesses access over £8.5bn of finance, the bank said. UKRI says it invests more than £8 billion a year in research and innovation and Innovate UK has awarded £885m in funding between 2020 and 2021.

The Backing innovation-led businesses report analysed 75,890 companies backed through British Business Bank investments, 14,594 backed through Innovate UK programmes, and 2,306 spinouts that had received support from UKRI research councils.

Professor Dame Ottoline Leyser, chief executive of UKRI, said supporting emerging businesses better would play a key role in “driving a research and development intensive economy” and delivering better results across the UK.

In the UK’s South West and West Midlands, 12 and ten spinouts respectively received investment, the British Business Bank found. Yorkshire and Humber saw eight spinouts receive funding. Northern Ireland and the North East of England both had seven spinouts receiving funding. The East Midlands and North West each had six spinouts receiving funding, while Wales had five.

Equity investing involves investing money into a company in return for a stake in the business.

The University of Aberdeen spinout, Elasmogen, aims to develop novel medicines. One of its technologies is inspired by proteins found in sharks’ immune systems that can get deeper inside solid cancer tumours because of their small, unique shape.