Small firms in Wales have the greatest propensity to utilise external finance in the 海角视频, according to new research from the British Business Bank. Although its value of equity deals in a 海角视频-wide context remains low with the continued dominance of London and south east of England.
Accordingly to the second Nations and Regions Tracker report from the 海角视频 Government’s economic development bank, Wales is only one of three 海角视频 nations and regions to buck a trend of falling usage of external finance. Some 40% of 海角视频 smaller businesses were using external finance in the four quarters to Q2 2022, down from 42% a year earlier. However, in Wales it remained unchanged at 47% - the highest rate in the 海角视频. The only other parts of the 海角视频 above the average was the north west and the east of England.
On equity finance the report shows that in the first half of 2022 there were 35 reported equity deals in Wales, with an investment value of just over £39m compared to £25m in the same period last year. The number of deal represented 2% of the total number of 海角视频 deals in the first half of the year and on value just 0.5%. Wales has 4% of the total 海角视频 small business population.
For 2021 there were 2,601 海角视频 equity deals reported with a combined value of £18.1bn into small firms. Wales had two deals with a statistical rounded figure of 0% reported on value. Firms in London and the south east of England were responsible for 59% of the deals and on value 75%. While they have large business populations, both on deal numbers and value it is higher their proportion of overall 海角视频 firms.
Whilst economic conditions may impact the remainder of the year, overall venture capital investment in Wales in 2022 is expected to be in line with 2021 levels.
In early-stage equity finance, the pace of growth in investment in the regions and nations outside of London in 2021 was much stronger than in the capital.
Seed stage investment, which is key to building the pipeline of investable opportunities to drive larger quantities of later stage capital investment in the future, increased by 88% in value outside of London in 2021, whereas in London it fell by 22%.
The Nations and Regions Tracker also found that businesses in the most deprived areas of the 海角视频 are more open to using finance and report higher levels of ambition for growth, whilst facing greater challenges in accessing external finance.
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Nearly half (49%) of businesses in the most deprived areas have a long-term ambition to be a significantly larger business, compared to 40% elsewhere. They are also more willing to use external finance to grow (36%) than businesses in less deprived areas (33%).
However, the report found that the growth ambitions of smaller businesses in the 海角视频’s most deprived areas are being stifled because of a lack of access to finance. Just over 14% of firms in Wales are based in the most deprived areas (England and Wales), making them more likely to face barriers to growth.
A quarter (26%) of smaller businesses - defined as employing less than 250 or having revenues below €50m - in need of finance in deprived locations did not apply for finance. Of those who did apply between 2020-21, 16% were turned down compared to just 11% elsewhere.
Susan Nightingale, 海角视频 network director for Wales at the British Business Bank, said:“Our 2022 Nations & Regions Tracker highlights the ongoing vitality of Wales’ financial ecosystem, despite strengthening economic headwinds.
“We want to continue to break down particular barriers to finance so that access to finance is a level playing field for all entrepreneurs – wherever they are and whatever their background.
“Wales is one of only three 海角视频 regions to buck the trend of falling usage of external finance in 2022, demonstrating that our business owners and entrepreneurs are working hard to drive the Welsh economy forward.”
As part of expanding its funding offer to firms in Wales, the British Business Bank will next year launch a specific Welsh investment fund with a value of £130m to back the growth of SMEs. The funding is likely to be split into a number of pots, including for equity.
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