Deals update

Record equity investment for smaller companies

Susan Nightingale
Susan Nightingale: Scotland bucking the trend

Smaller firms in Scotland saw record levels of equity investment last year, though the number of deals fell, according to research from the British Business Bank.

The Bank’s annual Small Business Equity Tracker, published today, showed that equity deals involving small businesses totalled £762 million last year, up 37% on the previous year’s record of £557m. 

While the overall value of investment activity rose, the number of announced equity deals fell by 22% against the previous 12 months to 190, suggesting a continued trend for higher value deals. Between 2020 and 2022, 8.9% all announced equity deals involved businesses in Scotland..

UK-wide, the economic downturn had a significant impact on deal activity in the latter part of 2022, with total investment value declining by 11% to £16.7 billion compared to the previous year.

The total number of deals also dropped 7% to 2,702 – representing the first annual fall in equity deal volumes since the Beauhurst data series began in 2011.

The report reveals that 2022 was a record year for university spinouts. Businesses stemming from academia received £2bn – 12% of total equity investment. In 2021, Scotland ranked top in the UK for the number of announced equity deals in university spinouts, with 47 of the total 243 deals coming from Scottish academic institutions.

After Oxford and Cambridge, the University of Edinburgh claimed the third highest number of spinout deals last year, with 15 businesses securing equity investment. The average deal size for university spinouts across the UK was £8.9m, one-third higher than the wider market.

Businesses in the tech sector continued to dominate the UK’s equity landscape, with smaller firms involved in clean tech in particular experiencing notable investment growth in 2022. Tech sector investment in Scotland rose by 34% in 2022 to £333m.

Susan Nightingale, director, UK Network, Scotland at the British Business Bank, said: “It may be too early to see the full impact of higher inflation and rising interest rates on the financial ecosystem, but Scotland is so far bucking the trend for lower deal values that we have seen at a UK level.

“Further financial support for smaller businesses is set to be available next year, with the launch of our new £150m Investment Fund for Scotland, which will continue to help smaller firms access the finance they need to thrive and develop.”

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