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Equity investment in UK SMEs increases by 24% to £8.5 billion


Rhian Elston
Investment Director
Published:
rhian

British Business Bank’s annual Small Business Equity Tracker Report shows that Wales out performs other parts of the UK

The value of total equity investment in the UK’s small to medium-sized businesses rose by 24% to £8.5bn in 2019 the highest amount recorded. With a record number of deals, (rising 4% to 1,832) and deal sizes up by 21% it reverses the decline reported in 2018, according to the latest Small Business Equity Tracker report published by the British Business Bank.

With 73 deals in 2019, Wales outperformed many parts of the UK and accounted for 4% of the total 2019 UK deal share. Wales achieved 3.3 deals per 10,000 SMEs and a total investment value of £60m (up 17%) compared to an average of 1.9 deals per 10,000 SMEs across all other regions in the UK (excluding London). With 28 equity deals in 2019, Cardiff was the joint 5th  local authority district in the UK when excluding London Boroughs.

According to Beauhurst, the Development Bank of Wales retained its status as one of the top five technology investors in the UK in 2019 (by volume). Figures released by the Development Bank show equity investment of £16 million in the 2019/20 financial year.

Rhian Elston, Investment Director at the Development Bank of Wales said: “The Small Business Equity Tracker report, which analyses Beauhurst data on equity investments throughout the UK in 2019, provides an important benchmark of the market immediately prior to the Covid-19 pandemic. 48% of deals by number took place within London but it is pleasing to see that the volume of activity here in Wales was strong compared to all other regions of the UK, with Wales coming third only after London and Scotland for deals per 10,000 SMEs. This is a clear sign of investor confidence in Welsh  businesses and their potential for growth.

Equity funding is most suitable for high-growth businesses that need cash to speed up their growth plans, or early stage technology businesses that cannot support loan repayments whilst their business develops. Often referred to as patient capital, equity investment is a longer partnership than a loan. “The advantage is that a business owner does not have to make monthly repayments and therefore all the investment raised can be used  to expedite growth.

“Choosing the right long-term investment partner means that businesses also benefit from valuable skills, contacts and experience. The relationship is based on so much more than just capital; supportive investors like the Development Bank actively add value to the management team because they have a vested interest in the business' success - its growth, profitability and increase in value.

“As the economic impact of Covid-19 continues to affect businesses across the country, many business owners will be considering equity investment as a means of supporting growth, investing in innovation, perhaps acquiring another business. Now is the time to consider an investment of long- term capital that can give business owners the fire power and support to accelerate growth.”

The Development Bank of Wales has supported Nutrivend since 2012. Run by former rugby internationals Scott Morgan and Barry Davies, they initially applied for a micro loan to set-up up the business. Follow-on equity investment of £675,000 has enabled the business to go from strength-to-strength along with the appointment of Nigel Skinner as a non executive director.  

Scott Morgan, Managing Director of Nutrivend said: “It’s been a really exciting journey. Since we set up Nutrivend and received our initial finance, we have grown the business from when it was just me to 20 staff. We now have depots across the UK.

“Both the loan and equity investment from the Development Bank of Wales has been fundamental to our ability to grow the business. Without investment, it gets to the point where you battle on, on your own and try to do the best you can. Some business owners think that by selling shares in their business, they are giving something away. But, you aren’t giving away shares in your business - you are selling them and getting value in return.

“In fact, by selling a share in your business now, you may well be able to speed up your growth plans and create a much larger, more profitable business.  So, the question to ask yourself is are you prepared to sell a share of your company now in order to have a share of a much bigger business in the future – and achieve your ambitions for the business? We did and it worked for us. I know I’ll look back in ten years’ time knowing the business has had every opportunity to succeed.”