The number of equity investments into small firms in Wales and their value have fallen, according to new research from the British Business Bank. Its Small Business Finance Markets 2024/25 report shows that Wales suffered a 14.3% fall in announced equity deal numbers and a 45.7% fall in their combined investment value in the first three quarters of 2024 compared to the same period in 2023.
In total 48 equity with an investment value of £54.9m were reported. This compared to the same period in 2023 with 56 deals and a value of £101,2m.
For the 海角视频 as a whole there was a 24.3% fall in deals to 1,303 (1,721 in 2023), but with the value of deals up 6.6% from £6.47bn to £6.89bn.
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The number of deals in Wales made up 3.7% of the 海角视频 total and just 0.8% on value. The decline in deal numbers in Wales mirrors much of the 海角视频 where equity investments decreased across all nations and regions, part from the north East of England.
海角视频-wide the proportion of smaller businesses accessing finance fell from 50% in Q3 of 2023 to 43% in Q2 of 2024. The British Business Bank, which is the economic development bank of the 海角视频 Government, said this was likely due to business confidence remaining low.
Despite a 海角视频 trend for declining finance usage, Wales demonstrated a relatively stable trend that continued into the first half of 2024.
The proportion of smaller businesses in Wales using external finance was 53% in H1 2024, broadly in line with the finance usage rate seen in H2 2023 (54%). Meanwhile, the share of businesses that would be happy to use external finance in order to grow increased from 24% to 31% over the same period.
Access to finance is particularly crucial for innovation active smaller businesses in Wales. The report finds that access to external finance is most vital to businesses that are innovation-active, since these are consistently more likely to have applied for, sought or considered finance recently than their innovation-inactive counterparts.
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Some 54% of innovation active small businesses in Wales considered or secured external finance in the past three years, compared to just 18% of innovation inactive firms – the largest percentage disparity in the 海角视频 - highlighting the strong link between finance accessibility and innovation-led economic growth in Wales.
Highly deprived areas in Wales show more ambition for growth through external finance
Smaller businesses in highly deprived areas of Wales demonstrate strong growth ambitions, with 44% aiming for significant expansion compared to 32% in less deprived areas.
However, these businesses face greater barriers to securing finance, with lower confidence in obtaining funding from banks (47% versus 51% elsewhere) and a higher likelihood of seeing finance access as an obstacle (9% versus 7%). Additionally, awareness of alternative finance options, such as venture capital, remains lower in these areas, highlighting the need for improved financial education and support.
Challenger and specialist banks continue to outperform the bigger traditional banks. For the fourth consecutive year, challenger and specialist banks account for a higher share (60%) of total gross lending than the big five banks (40%) – the highest on record.
The lending landscape has changed considerably since 2014, with the British Business Bank report revealing that 60 new banking licences have been granted in the last decade, with 36 being issued to providers serving smaller businesses.
Susan Nightingale, director for the devolved nations at the British Business Bank, said: “It is clear that conditions continue to be tough for smaller businesses, with some domestic uncertainty meaning many were less willing to invest with confidence in 2024. In Wales we are certainly experiencing these challenges, and while equity deal numbers and investment values are tracking more strongly against the 海角视频 average than many other Nations and regions, there’s no doubt that the data is going in the wrong direction, when it comes to meeting our growth ambitions.
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“The diversity of supply of finance, in terms of both product and provider, is an important factor in meeting the diverse needs of the 海角视频’s highly varied smaller business community. The increasing role for challenger banks in 2024, for which Wales is a significant base, is an encouraging sign, as is the ongoing roll out of the Bank’s £130m Investment Fund for Wales, where the strong equity element will make a significant impact on the Welsh smaller business landscape in the months and years to come.
“The findings from this report further emphasise the need to ensure smaller businesses across the 海角视频’s nations and regions have better access to the finance they need to invest. We will continue to support 海角视频 economic growth by providing them with the capital they need to start up, scale up and stay in the country as they realise their full potential.”