Revealed: The hotspots of UK equity investment in 2016

Equity deals to smaller businesses in the UK fell last year across all sectors, by 18% in terms of the number of deals and by 4% in terms of value

The UK hotspots for equity investment have been revealed in a report by the British Business Bank.

Its third annual Small Business Equity Tracker, which provides an in-depth assessment of equity markets for growing businesses, has revealed that businesses in the City (London’s financial district) and a number of tech clusters are the main focus of attention for both oversea and indigenous investors.

For 2016, Hackney London Borough Council topped the list of equity investment deals for local authority areas – with the majority of money put down in the software sector.

Camden, Westminster City and City of London all followed in second, third and fourth place respectively, with software once again being the main area of investment.

Not surprisingly, London dominated the list – with sixth-placed Cambridge City the first ‘regional’ area to break the trend.

Despite bagging £1.9bn in funding in 2016, the nation’s capital actually experienced a drop in its share of UK deals (47%, down from 50% in 2015); a 22% decline in the total number of deals; and a drop in total investment value of 1%.

Edinburgh, Manchester, Bristol and Birmingham, and the already-established equity eco-systems of Oxford and Cambridge were the best preforming regionally areas.

Worryingly, equity deals to smaller businesses in the UK fell last year across all sectors in 2016, by 18% in terms of the number of deals and by 4% in terms of value.

While Brexit could be suggested as a possible factor for the decline, this drop in investment was in line with a wider global slowdown in equity finance last year.

In contrast, businesses in the tech sectors bucked the overall downward trend, with investment in this area rising to £1.7bn – the highest level on record.

In total, technology represented 49% by value of the total equity market.

However, the latest research from Beauhurst shows record equity investment in UK businesses in the first half of 2017 is up by 74.7% on the previous six months.

Top 10 UK local authority areas for equity investment deals in 2016:

1. Hackney London Borough Council (software)
2. Camden London Borough Council (software)
3. Westminster City Council (software)
4. City of London (software)
5. Tower Hamlets London Borough Council (business and professional services)
6. Cambridge City Council (software)
7. Islington London Borough Council (software)
8. Lambeth London Borough Council (software)
9. Edinburgh City Council (business and professional services)
10. = Southwark London Borough Council (business and professional services)
10. =Manchester City Council (software)

Keith Morgan, CEO of British Business Bank, said:

“This research provides the most accurate and complete view of the state of the small business equity finance market in the UK for growing businesses.

“While the market here followed the global downward trend in equity investment, there are positive signs of innovative growing businesses receiving significant investment in clusters across the UK.

“Regional disparities continue, however, and that’s something we’re working hard to address. We launched our £400m Northern Powerhouse Investment Fund earlier this year, and this is already providing funding to fund managers who are investing in local businesses. We will be introducing similar initiatives for the Midlands and Cornwall and the Isles of Scilly over the coming months.”

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