The British Business Bank’s fourth annual Regions and Nations tracker has been published and presents ‘cautious optimism’ regarding the shape of the UK’s small business finance markets.
Renewed confidence in external finance as a means of supporting growth and managing uncertainty is one of the key drivers of this cautious optimism. Although the financial climate remains unsettled at present, re-engagement with external finance helps to address investment gaps and mitigate some of the challenges for both equity and debt finance.
The report takes its findings from intelligence obtained through the British Business Bank’s UK network and as an active participant in finance markets.
Noteworthy findings from the report include:
- External finance use among smaller businesses recovered in 2023 across most UK Nations and regions, reaching 46% from 36% the year before – although only the East of England saw no positive change;
- Use of credit cards in particular saw the strongest upturn nationally, while grants, bank loans, and loans from family and friends all experienced a fall compared to 2022;
- Smaller businesses are still impacted by ongoing challenges such as rising costs (76%) and concerns about the trading environment, with 61% reporting they still believed this offered more threats than opportunities;
- Equity deal numbers declined across the UK in 2023. However, some locations outside London, including the East of England, show a relatively strong performance in generating equity deals – perhaps buoyed by proximity to investors and thriving innovation clusters;
- There are promising signs of recovery in equity activity in the first half of 2024, despite continued decline in deal numbers. Equity funding for smaller businesses rose by 7% in Q1 2024 compared to Q1 2023.
Increased demand for and access to external finance are fundamental drivers of the UK’s small business finance markets, including its resilience and productivity in the overall economy.
You can read the complete Nations and Regions Tracker: Small Business Finance Markets 2024.