The British Business Bank recently published the latest news from the Small Business Equity Tracker. We take a look at the detail to find out what it tells us about the UK’s innovative SMEs and how they are attracting equity investment.
Who is the British Business Bank?
Established in 2014, the British Business Bank acts as the UK government’s development bank. Its stated mission is “to drive sustainable growth and prosperity across the UK, and to enable the transition to a net-zero economy, by improving access to finance for smaller businesses.” It has an important role in helping UK-wide smaller businesses access a range of finance programmes.
Their Small Business Equity Tracker 2022 Report offers a picture of equity funding conditions for smaller businesses across the UK.
What are the recent trends in SME equity finance?
The headline is that UK Equity funding reached a record £18.1 billion in 2021, nearly double the 2020 level. We were particularly interested to see that Technology and IP-based businesses continue to attract both the largest number of deals and the most investment, 1,019 deals and £8.2 billion in 2021. Software and Life Sciences constitute the biggest sub-sectors, with £4.8billion and £1.7 billion investment in 2021, respectively.
How does the UK VC market compare to other countries?
The UK has a relatively high level of VC activity compared to other European countries but continues to lag behind the USA. The relative funding gap between the UK and the USA is a result of this lack of deep tech and R&D-intensive investment.
Relative to GDP, the UK has lower proportion of VC investment going to deep tech and R&D intensive companies than China, Sweden, and the USA.
The challenge for the British Business Bank
The British Business Bank is responding to the lower levels of funding that go to deep tech and R&D intensive companies with The Future Fund: Breakthrough programme. This is delivered through BPC and is currently trying to fill this gap but the scale of the challenge is large.
It’s great to see the strong momentum that is demonstrated in this report which can only be seen as an indicator of investor confidence in UK, even in the most challenging of times. At GovGrant we hope that more can be done to cement the UK’s position as a global hub for the technology sector. In particular by increasing support to those innovative companies that are rich in IPIntellectual Property services and R&D.