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Equity investment at record, but first-time backing falls

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Investment remains high in Scotland

Scotland retained its position as one of the most active equity investment markets in the UK last year with a record number of deals, though the number of early stage firms seeking their first investment fell, according to new research.

There were 446 deals north of the border during 2020 compared to 428 in the previous year, says Scottish Enterprise.

Scotland was third behind London in top spot (2,986 deals) and South East England in second (725 deals).

It was the fourth year in a row Scotland attracted more than £400 million of equity investment, although the total amount invested decreased from 2019’s figure of £485m to £430m.

The Digital and IT sector accounted for 30% of the deals, followed by Business Services (21%) and Technology and Engineering (19%). The remaining deals were spread across sectors such as Life Sciences and Food and Drink.

Deals below £500,000 were up slightly in terms of both number and amount invested. Across the UK, these figures fell by 12% and 14% respectively.

Scottish Enterprise said 90 investments were made via its Early Stage Growth Challenge Fund which was established by the Scottish Government to support emerging businesses through the pandemic with support from the angel network.

However, there was a slowing across the UK in the number of firms seeking their first investment. Of all deals completed UK-wide, 29% were first-time equity investments, compared with 33% in 2019. In Scotland, this figure fell from 29% in 2019 to 24% last year.

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The SE report reveals marked differences with research produced last week by the British Business bank which showed there were just 242 equity deals in Scotland in 2020, 12% of the UK total. Only London, with 965 deals – 47% of the total – had more, with the South East third at 188.

It also reported an increasing number of smaller businesses raising equity finance for the first time, contradicting the SE research.

A spokeswoman for SE explained that the BBB and SE use the same Beauhurst data, but different methodologies.  The BBB report is based on published deals only while SE methodology also extracts data from Companies House to identify all equity deals. 

Jan Robertson, interim director of growth investments at Scottish Enterprise, said the data demonstrated “the strength of Scotland’s entrepreneurial ecosystem and the quality of investment opportunities.

Jan Robertson: remaining focused

“Scotland’s early stage businesses will play a huge part in the country’s recovery from Covid-19. Many of them operate in sectors of significant economic opportunity like low carbon, digital, and health and care, and their development needs to be nurtured carefully.

“With our data pointing to the growing impact of the pandemic on investment in emerging businesses, Scottish Enterprise remains focused on supporting that area of the economy.

“Through continued co-investment alongside investors in the private sector and by providing access to specialist advice, we’ll help early stage businesses secure the patient capital and expertise needed to fuel their growth.”



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