London continues to dominate as city-based clusters lead equity investment market

According to latest research from the British Business Bank

London is the UK’s leading hotspot for equity investment, according to the third annual Equity Tracker, published today by the British Business Bank.

The Small Business Equity Tracker provides an in-depth assessment of equity markets for growing businesses, delivered in partnership with data specialist Beauhurst.

The findings show that, following five years of growth, equity deals to smaller businesses in the UK fell last year across all sectors, by 18 per cent in terms of the number of deals and 4 per cent in value. This was in line with a wider global slowdown in equity finance in 2016.  However, the latest research from Beauhurst (released last week) shows record equity investment in UK businesses in the first half of 2017, up by 74.7 per cent on the previous 6 months.

Today’s Equity Tracker outlines emerging clusters of strong deal activity around the country. Technology sectors bucked the market trend as the amount invested rose to £1.7bn – the highest level on record meaning technology represented almost half (49 per cent) by value of the total equity market.

London continued to experience greater levels of equity investment compared to other UK regions, with £1.9bn in funding in 2016. Last year, 498 equity investment deals were signed in the capital. The city is the country’s leading hotspot for investment in the software sector (388 deals) and the business and professional services sector (110 deals).

However, the capital experienced a decrease in its share of UK deals (47 per cent, down from 50 per cent in 2015); a 22 per cent decline in the total number of deals; and a drop in total investment value of 1 per cent.

Despite this, London boroughs make up 11 of the top 15 equity investment clusters in the UK (a full table is provided below).

Elsewhere, trends in equity deals varied geographically, with successful equity clusters in many UK cities, including Edinburgh, Manchester, Bristol and Birmingham, and the already-established equity eco-systems of Oxford and Cambridge. These clusters often have a combination of innovative companies, skilled staff and equity investors, creating dynamic hubs of growth and propelling equity investment.

Keith Morgan, CEO, British Business Bank, said: “This research provides the most accurate and complete view of the state of the SME 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.”


Top 25 Local Authority areas for equity investment deals in 2016:

RankLocal Authority DistrictSector with highest number of deals
1Hackney London Borough CouncilSoftware
2Camden London Borough CouncilSoftware
3Westminster City CouncilSoftware
4City of LondonSoftware
5Tower Hamlets London Borough CouncilBusiness and professional services
6Cambridge City CouncilSoftware
7Islington London Borough CouncilSoftware
8Lambeth London Borough CouncilSoftware
9Edinburgh City CouncilBusiness and professional services
10=Southwark London Borough CouncilBusiness and professional services
10=Manchester City CouncilSoftware
12Oxford City CouncilLife science
13Hammersmith and Fulham London Borough CouncilSoftware
14Wandsworth Borough CouncilBusiness and professional services
15=Kensington and Chelsea Royal Borough CouncilBusiness and professional services
15=Bristol City CouncilSoftware
17Glasgow City CouncilSoftware
18=Cardiff CouncilBusiness and professional services
18=Newcastle upon Tyne City CouncilBusiness and professional services
20Sheffield City CouncilIndustrials
21=Barnet London Borough CouncilSoftware
21=Leeds City CouncilSoftware
21=Birmingham City CouncilSoftware
21=Brighton and Hove City CouncilSoftware
25Liverpool City CouncilSoftware


 

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