Equity Investment in Smaller UK Businesses Reached a Record £8.8Bn Last Year
- Investment , Banking
- 16.06.2021 09:23 am
Equity investment in the UK’s smaller businesses increased by 9% in 2020 to £8.8bn, the highest amount since the Beauhurst data series began in 2011, reveals the British Business Bank’s annual Small Business Equity Tracker, published today. The strong momentum continued into Q1 2021, with the total value of equity investment in smaller businesses reaching £4.5bn, by far the highest amount ever recorded in a single quarter.
Catherine Lewis La Torre, CEO, British Business Bank, said: “The UK’s small business equity finance market had a record year in 2020 with activity ramping up in the second half. This momentum continued into the first quarter of 2021 with record breaking levels of investment – a clear sign of returning investor confidence in UK smaller businesses and the country’s economic recovery.
“The Bank supported 21% of all announced UK equity deals in 2020, and as the impact of Covid-19 continues to affect businesses across the country, the work we do and our focus on investing with purpose has never been more important. Building on the UK’s position as a science superpower, we will continue to provide the world class businesses of the future with the capital they need to start up, scale up and remain anchored in the UK.”
UK deep tech investment soars
Investment in UK deep tech companies has continued to grow rapidly in the past five years, rising 291% to £2.3bn in 2020. The number of deals also increased by 78% to 440 in the same period. This is higher than the increases seen in the number of deals in the US and rest of Europe – 66% in the US and 73% in the rest of Europe.
However, when it comes to the overall value of investment, the UK still lags behind. UK deep tech companies receive substantially smaller rounds of funding than the US. The average UK deep tech company raises £24m after six rounds of funding, compared to the £113m raised by the average US deep tech company after six rounds.
US deep tech companies received almost twice the level of investment than those in the UK, even after accounting for size differences between the two economies. Between 2018 and 2020, UK deep tech companies received investment equivalent to 0.09% of UK GDP whilst US deep tech companies received investment equivalent to 0.16% of GDP.
Future Fund: Breakthrough, a new £375m UK-wide scheme due to launch this summer, will help address the later stage equity finance gap faced by innovative UK deep tech and R&D-intensive companies.