London dominates growth finance in the UK with 62% of equity investment and over a third (35%) of private debt investment happening in the capital, according to the British Business Bank’s first annual Regions and Nations Tracker reveals today. That’s despite London hosting around only one in five (19%) of the UK’s smaller businesses.
The report reveals London smaller businesses benefit from the capital’s position as a financial hub with the highest proportion of within-region investment in the UK. It found 59% of equity stakes in the capital involve an investor with an office within 20 minutes of the recipient business, and 90% within a one-hour travel time.
London local authorities account for half of the top 20 table for the number of equity deals secured since 2011. Westminster, the City of London, Islington, Hackney and Camden making up the top five. The City of Edinburgh, Manchester and South Cambridgeshire are the only non-London local authorities to make the top ten for equity deals.
Investors in London are also more concentrated than elsewhere in the UK, with Westminster-based investors involved in 30% of pairings, following by Islington at 18%. London-based investors are dominant in the capital, with relatively little activity in London from investors based elsewhere in the UK.
London investors are also expanding their reach beyond the capital and investing heavily in other regions and nations. On average, 60% of the equity stakes into businesses in the East of England, South East, East Midlands and South West are held by London investors. These regions are the most reliant on the capital for equity investment.
London based investors are also involved in about a third of all equity stakes into businesses in the North West (30%), West Midlands (37%) and Yorkshire and the Humber (35%) and about one in five into businesses Wales (22%) and Northern Ireland (17%).
More widely, the report found London, the South East, the North West and the East of England accounted for 86% of equity investment and 69% of private debt investment despite hosting just 55% of UK smaller businesses. By contrast, Yorkshire and the Humber accounts for just 1.5% of equity investment and 4.9% of private debt activity while hosting 7.2% of the business population.
Steve Conibear, UK Network Director, South and East of England at the British Business Bank of British Business Bank, said: “The gaps in growth finance between London and the regions are undoubtedly holding back ambitious entrepreneurs and lead to wasted economic potential. This is something the British Business Bank is committed to changing.”
The British Business Bank’s commitment to address regional imbalances
In London, the British Business Bank supports £2.68bn of finance to 8,369 smaller businesses through its core programmes.
The Bank remains committed to addressing regional imbalances in access to external finance. 86% of businesses supported by British Business Bank’s programmes are based outside of London.
Between 2020 and 2021, the Bank invested £943m into businesses based outside of London (exceeding its original target of £868m).
Across its Regional funds, record deployment was recorded this year principally due to a strong second half of 2020/21, providing a £357m flow of finance into regional finance markets in 2020/21.
Regional fund managers also successfully secured co-investment from other Bank-delivered programmes, such as the Future Fund, to best support local companies.