Record rise in equity investment in smaller UK businesses

24/06/2021

Equity investment in smaller UK businesses reached a record-breaking £8.8bn last year, despite COVID-disruption and Brexit.

According to the British Business Bank, the total value of equity investment in smaller businesses increased by 9% in 2020 to £8.8bn. This is the highest value recorded since the Bank started tracking the data 10 years ago.

And, this fast growth continued into 2021.

In Q1 of this year, the total value of equity investment in smaller businesses reached £4.5bn – the highest value ever recorded in a single quarter.

Catherine Lewis La Torre, CEO, British Business Bank, said that the figures are a clear sign of returning investor confidence.

She said: “As the impact of Covid-19 continues to affect businesses across the country, the work we do and our focus on investing with purpose has never been more important.

“Building on the UK’s position as a science superpower, we will continue to provide the world-class businesses of the future with the capital they need to start up, scale up and remain anchored in the UK.”

What is equity investment?

Equity investment is where a business raises capital from external investors in return for shares in the company. This finance helps businesses to achieve their growth objectives.

Learn more about equity investment

What are the benefits?

• The money raised can help fund growth and investment
• Investors supply expert advice and support, as well as their ‘contact book’ to unlock new growth avenues
• Equity finance providers earn dividend payments on your company’s profits, ensuring their commitment to boosting your company’s success
• The level of control exchanged depends on the contract signed. Typically, the more they invest the higher a share an investor will expect

Why the sudden growth in use?

The increase in equity investment is partly due to the work of the British Business Bank and the launch of the Future Fund.

The Bank supported around 21% of all announced equity deals in 2020 compared to 10% in 2019.

Of this, 11% was from the Future Fund.

The Future Fund was a government scheme to support UK-based companies, particularly start-ups and scale-ups, facing financing difficulties due to the Coronavirus outbreak. 

This scheme has now closed for new applicants but a new £375m UK-wide scheme is due to launch this summer.

Future Fund: Breakthrough will encourage private investors to co-invest with the government in high-growth, innovative firms.

If you’d like to learn more about equity investment and if it could benefit your business, our team can help. Contact us on 0800 9774833 or request a call back to discover the most suitable funding options for your business.