UK businesses received more than £18bn in private debt lending during 2018 and 2019, highlighting the significant role that the private debt market can play in helping businesses recover from the Covid-19 downturn, the British Business Bank has said.
The UK Private Debt Research Report was published with support from the British Private Equity and Venture Capital Association (BVCA), with a particular focus on how private debt financing can address regional imbalances.
It found that in 2018 and 2019, 82 per cent of all private debt funding deals and 65 per cent (£5.9bn) of private debt investment value was into companies outside of London, with strong regional clusters of private debt activity spotted in the North West and Yorkshire and The Humber.
According to the report – which was released this morning (11 February), over £1bn of growth finance was delivered to UK businesses through 563 deals in 2018 and 2019. The use of growth deals at the smaller end of the market indicates that demand for private debt is unlikely to decrease, and may prove to be a particularly suitable for companies coming out of the Covid-19 downturn with a growing need for investment, the report concluded.
“In a relatively short period of time, private debt has established a position as a viable type of funding for the UK’s smaller businesses at different stages of development,” said Catherine Lewis La Torre, chief executive officer of the British Business Bank.
”As the focus shifts from stabilisation to economic recovery, supporting business growth will be a fundamental driver of a thriving post-Covid-19 UK economy. Ensuring that businesses can access the funding best suited to their needs will be vitally important in the coming years and private debt has an important role to play.”
The report also found that use of private debt was spread widely across a variety of sectors in 2018 and 2019. The manufacturing sector accounted for almost one fifth (19 per cent) of these deals, followed by businesses in the information and communication (16 per cent), and professional, scientific and technical activities (13 per cent).
“The BVCA is delighted to have supported the British Business Bank in the preparation of today’s report, a new and important publication that highlights just how useful private debt has become for smaller businesses,” said Michael Moore, director general of the BVCA.
“It is clear that this source of finance benefits companies across the country and, regardless of region, has established itself as real catalyst for growth. In a time where economic recovery is of utmost important, this is an incredibly positive sign.”