The British Business Bank’s annual Small Business Equity Tracker report shows investment in UK tech businesses rose by 27% last year to hit £4 billion – the highest level for eight years.
The study found that 52% of deals took place outside of London, with the south west of England, Scotland and Northern Ireland showing a strong increase in 2019, rising by 34%, 26% and 24%, respectively. Meanwhile, equity investments into UK “growth stage” companies rose by 39% to £5.3bn.
The UK’s thriving tech sector remains highly attractive to equity investors, accounting for 47% of total equity investment in UK SMEs through 691 deals in 2019.
Within tech, the sectors receiving the largest share of deals were software (425 deals worth £2bn) and life sciences (78 deals worth £540m). The verticals attracting the greatest amount of equity investment in 2019 were Software as a Service (471 deals worth £2.5bn), FinTech (193 deals worth £1.8bn) and AI (173 deals worth £880m).
Software as a Service companies in particular were highly attractive to equity investors, with investment value increasing by 69% in 2019 compared to 2018, a much larger increase than that seen in the overall market.
The Small Business Equity Tracker report, which analyses Beauhurst data on equity investments throughout the UK in 2019, provides an important benchmark of the market immediately prior to the Covid-19 pandemic. It shows the value of total equity investment in the UK’s smaller businesses rising 24% to £8.5bn in 2019 – the highest amount recorded – and a record number of deals, rising 4% to 1,832 with deal sizes up by 21%.
52% of deals by number took place outside of London, with South West, Scotland and Northern Ireland showing a strong increase by deal number in 2019, rising by 34%, 26% and 24% respectively. Several regions also saw investment levels by value increase strongly in 2019, including Northern Ireland (191%), Scotland (51%), North West (50%), London (37%), West Midlands (36%), and the South East (27%).
Keith Morgan, CEO, British Business Bank, said“The UK’s small business equity finance market saw a record year in 2019 with investment amounts soaring to £8.5bn. This was a clear sign of investor confidence in UK smaller businesses located across the country and their potential for growth as well as the strong fundamentals of the UK economy as a place to start and grow a business.”
“The British Business Bank’s equity programmes are estimated to have supported around 11% of all equity deals in UK SMEs in 2019. As the economic impact of Covid-19 continues to affect businesses across the country, the work of the Bank has never been more important. Ensuring a wide range of innovative and ambitious smaller businesses continue to have access to equity investment to support their growth plans will be essential to the UK retaining its world-leading position in science, innovation and technology.”
Alice Hu Wagner, Managing Director, Strategy Economics and Business Development, British Business Bank said:“The British Business Bank’s Small Business Equity Tracker report illustrates a strong interest in growth stage investment in the equity market in 2019, with a particular focus on tech businesses. Ensuring our high-potential later stage companies have the capital they need to compete on the global stage will be crucial to powering the economic recovery.”