Equity deals still flowing after record year
Equity investment in Scotland’s smaller firms reached record levels in 2021, with Edinburgh named as the largest UK hub for deal activity outside of London.
While the number of deals fell by 19%, the total value increased and there has been a positive momentum in the first quarter of this year despite a number of headwinds.
Research by the British Business Bank’s Small Business Equity Tracker found £549 million was invested in Scottish smaller businesses last year across 223 announced equity deals, with total investment up 74% compared to the previous 12 months.
Across the UK, deals were valued at £18.1 billion in 2021, nearly double the total seen in 2020.
Analysis from the Bank also included a review of the top UK hubs for equity investment over the past three years. Edinburgh achieved the top spot outside of London with an annual average of around £195 million of equity investment. The business and professional services sector was the largest sector by number of deals in the city.
Glasgow featured among the top 10 hubs with a yearly average of £83 million investment placing the city in sixth, while Aberdeen ranked joint 14th with £54 million of equity investment – predominantly in the energy sector. One-tenth of all the UK’s equity deals and a similar proportion (11%) of British Business Bank-backed investments over the past three years took place in Scotland – higher than the nation’s 6% share of the business population.
The Bank said that the strong momentum has so far continued into the first quarter of 2022, with the volume of Scottish equity deals involving small businesses between January and March reaching £260m, despite economic headwinds causing uncertainty for many firms.
Further financial support for Scotland’s smaller businesses is set to be available next year, with the launch of the new Next Generation of Regional Funds including a new £150m Scottish fund administered by the British Business Bank to further tackle geographical funding gaps.
Barry McCulloch, senior manager, UK Network, Scotland at the British Business Bank, said: “Smaller businesses play a crucial role in Scotland’s economy and it is highly encouraging to see that 2021 was a record year for equity investment, particularly at a time when the impact of the pandemic was still being felt.
“While there were fewer deals, the investment value increased significantly, indicating a smaller number of larger deals. We have also seen positive momentum in the first quarter of this year.
“Having three major cities named as top spots for investment activity reiterates the fact that Scotland, particularly Edinburgh, is an attractive destination for start-ups and entrepreneurs in sectors such as tech and life sciences.
“Wherever high growth potential businesses are based in the UK, it is more important than ever that they can access funding to support their goals. We will continue to provide businesses of the future with the capital they need to start up and thrive in Scotland.”
UK Government Minister for Scotland, Malcolm Offord, said: “These new figures are testament to the strength of Scotland’s SMEs and their attractiveness to investors – with Edinburgh, Glasgow and Aberdeen in particular showcasing the best in Scottish business talent.
“Supporting businesses is key to the UK Government’s focus on economic growth, helping level up opportunity in all parts of the UK and creating more well-paid and highly-skilled jobs.”