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External finance down across UK but signs of growth in regional equity finance markets
T he British Business Bank ’ s Nations and Regions Tracker has found usage of external finance has fallen overall across the UK , as nine out of the 12 regions saw a drop in the use of small business finance . In addition , 38 % of smaller businesses were using external finance in the second quarter of 2022 , down 7 % from 45 % a year earlier . Core debt products remain the most used and widely available across the UK nations and regions .
Equity finance fuels the UK ’ s nations and regions
Seed stage equity investment , which is key to building the pipeline of investable opportunities to drive larger quantities of venture and growth capital investment in the future , increased by 88 % outside of London in 2021 , whereas in London it fell by 22 %.
However , London ’ s dominance of equity finance markets continued in 2021 , with 1,286 deals worth £ 11.9 billion taking place , representing 66 % of investment and 49 % of deals in the UK . This was driven by stronger growth in London compared to the rest of the UK , rather than a decline in the other UK nations and regions . Every nation and region outside London – except the West Midlands – saw increased small business equity investment in 2021 compared to 2020 .
Q2 2022 data suggests that , despite global economic conditions , equity investment in the UK held up in both the number of deals and investment value in the first half of 2022 .
Investment in net zero sectors has grown faster than overall UK equity markets
The Nations and Regions Tracker found that equity investment in net zero sectors has grown at an even faster rate than overall UK equity markets . This growth has occurred across the UK ’ s nations and regions , with 69 % of deals and 67 % of investments taking place outside of London between 2011 and H1 2022 .
Since 2011 , £ 6.9 billion of equity investment has gone into net zeroaligned UK smaller businesses across 1,307 deals . In the first half of 2022 , £ 2.7 billion was invested across 165 deals in smaller businesses in net zero sectors , representing 22 % of investment and 12 % of deals during the period .
The Nations and Regions Tracker also found that equity investment in net zero has grown at a faster rate than overall UK equity markets in recent years . The share of deals which are in net zero sectors has grown every year since 2018 rising from 5 % in 2018 to 12 % in the first half of 2022 .
These equity finance flows have the potential to form new clusters around net zero innovation in several nations and regions of the UK , including Warwickshire , Oxfordshire , Cheshire East , Sheffield , Edinburgh , Glasgow and Bristol . �
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