Report reveals regional disparities in equity investments
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The North West accounts for just 4.2% of total UK equity investment, compared to London’s 62%, but Manchester, Liverpool and Cheshire East account for the lion’s share (53%) of all deals in shares in the region, according to a new study shows.
The British Business Bank’s first annual regional and nation tracking released today (October 7) shows 42% of businesses in the Northwest were using external finance in 2021, but economic potential continues to be wasted due to regional disparities in access to equity financing. and private debt.
Basic debt products, including overdrafts, loans and credit cards, are the most widely used forms of business financing in all regions and countries of the UK, but equity financing and private debt can support companies with rapid growth potential.
Manchester, Liverpool and Cheshire East are the epicenters of the North West equity ecosystem in terms of corporate earnings, accounting for 31%, 11% and 11% respectively, compared to zero equity deals in Blackpool and Barrow-in-Furness. .
The report also highlighted the lack of use of equity in the northern regions.
The North West saw the most investment, accounting for 5.7% of UK stock trades in 2020, but this was lower than its share of the UK business population (nine percent).
In contrast, London accounted for 47.2% of stock transactions and 19% of the corporate population. Manchester was identified in the top 20 UK local authorities for equity activity, accounting for 2% of all UK transactions between 2011 and 2020.
Catherine Lewis La Torre, CEO of British Business Bank, said: “The decline in financial flows in some regions and localities reflects a population of businesses operating with less choice.
“These gaps in financing for growth undoubtedly hold back ambitious entrepreneurs and waste economic potential. This is something the British Business Bank is committed to changing.
The report found evidence of a strong local finance ecosystem in the Northwest, with the investor having an office within two hours of the company headquarters for 51% of the pairs. In contrast, the closest office to 30% of investors investing in the North West was in London.
The preference for short-haul offers has not been affected by the increase in remote work due to COVID-19, the data shows only a slight increase in the average and median commute time in 2020.
Access to growth finance is particularly difficult for rural business owners who are more likely to resort to injecting personal funds into their businesses, especially in the construction sector. The report found that 38% of rural construction business owners used personal funds, compared to 27% of their urban counterparts.
The report argues that investors with a local presence are critical to the success of UK stock ecosystems. The data shows a clear positive correlation between high-growth corporate equity trading and the strength of the local investor base.
The bank said it remained committed to addressing regional imbalances in access to external finance – 86% of businesses supported by British Business Bank programs are based outside London, with £ 943million invested between 2020 and 2021.
In the North West, the bank’s main programs support £ 693.1million in financing, reaching 7,639 small businesses
Across all of its regional funds, a record rollout of £ 357million of funding was recorded this year, mainly driven by a strong second half of 2020/21.
Since its launch, the £ 500m Northern Powerhouse Investment Fund (NPIF) has invested over £ 256m in 840 SMEs, with £ 310m of private capital raised alongside it.
Regional fund managers have also been successful in securing co-investments from other banking programs, such as the Future Fund, to best support local businesses.