Small businesses attracted a “record” amount of equity investment throughout the coronavirus pandemic, new figures have revealed.
The research, published by the British Business Bank (BBB), shows that interest in UK start-ups has continued to skyrocket, despite Covid-19 disruption.
According to the report, equity investment in small UK businesses increased by nine per cent in 2020 to £8.8 billion – the highest on record since the launch of the BBB’s Small Business Equity Tracker in 2011.
But the figures suggest that this record won’t last for long. In just the first three months of 2021, small businesses raised over £4.5 billion – representing the “highest amount ever recorded” in a single quarter.
The authors suggest that investment was largely driven by the UK’s booming tech sector, accounting for 46 per cent of total equity investment.
Equity investment in deep tech companies, for example, has risen by some 291 per cent in the last five years, with deals growing by 78 per cent over the same period. This means that the UK’s deep tech equity investment market has grown at a faster rate than the US (deals up 66 per cent) and Europe (deals up 73 per cent).
The overall value of investment, however, falls behind the US, with UK deep tech businesses receiving, on average, just half the level of investment of similar-sized US businesses.
Commenting on the figures, 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 figures come ahead of the introduction of the New Future Fund: Breakthrough scheme. Set to launch this summer, the £375 million initiative aims to encourage private investors to co-invest with Government in “high-growth, innovative firms”.
The BBB said the scheme will “help address the later stage equity finance gap faced by innovative UK deep tech and R&D-intensive companies”.
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