SMALL- and medium-sized enterprises (SMEs) attracted £6.7bn in equity investments last year – the highest amount ever recorded. This represents a five per cent year-on-year increase.
According to the British Business Bank’s annual Small Business Equity Tracker report, the UK equity investment market has grown by 72 per cent in just two years.
This growth has been particularly significant outside the capital, where the value of equity finance investment outside of London increased by 29 per cent last year, to £2.8bn.
The east of England, the North West and the West Midlands were identified as being the three regions driving this increase, with equity investment increasing by 118 per cent, 115 per cent and 81 per cent, respectively.
SME equity investments were up by 65 per cent in the North East, by 15 per cent in Yorkshire and Humber, and by 11 per cent in Wales.
“This research by the British Business Bank shows the UK’s SME equity finance market saw a record year in 2018 with investment amounts soaring to £6.7bn,” said Keith Morgan, chief executive of the British Business Bank.
“This is a clear sign of investor confidence in British smaller businesses and their potential for growth.
“We are particularly pleased to see a 29 per cent increase in investment outside of London. The British Business Bank continues to work to address regional imbalances in access to investment to ensure smaller businesses across the UK can access the equity finance they need to fulfil their growth potential.”
The tech sector won the most investment, with equity investment in tech businesses increasing by 24 per cent last year – the highest amount to date.
The report also found that while the value of equity investment had risen, the number of deals declined by six per cent last year. The largest decline was seen at the seed stage.
“The British Business Bank’s Equity Tracker report points to a maturing market for equity finance in the UK, with a small dip in the volume of investments and larger deals further down the pipeline increasing the overall value of lending,” said Alice Hu Wagner, managing director of strategy economics and business development at the British Business Bank.
“Standing at £4.5m, the average equity deal size in the UK is up 11 per cent on 2013. When combined with high regional growth, this demonstrates that conditions are improving and the UK equity finance market is strong.”