Smaller firms taking out more finance after decline in 2022
Smaller businesses are taking out more finance again after a decline in 2022, a new report from the British Business Bank has found.
The state development lender’s third annual Nations and Regions Tracker found that just 36 per cent of smaller firms sought external finance last year.
The East of England recorded the highest use of external finance (41 per cent), while the South East and East Midlands reported the lowest share (34 per cent).
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However, the first half of 2023 has seen some signs of recovery, the British Business Bank said, with levels of external finance returning to 2021 levels (43 per cent).
Academic spinouts made a large contribution to equity activity, with 33-innovation-led clusters representing 93 per cent of technology-related equity deals.
Smaller businesses in coastal towns were found to have a lower appetite for external finance, with just 26 per cent saying they were happy to take out finance to grow, compared to the UK average of 31 per cent.
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The British Business Bank said this is linked to a lower propensity by these businesses to pursue ambitious investment and innovation plans.
For example, in 2022 only 34 per cent of smaller firms in coastal towns said that they had a long term ambition to be a significantly bigger business, a much lower share than their counterparts in the rest of the UK (40 per cent). Furthermore, only 41 per cent agreed that they were prepared to take risks to be successful, compared to 46 per cent nationwide.
“We are seeing promising signs that the use of external finance among smaller businesses is recovering after a decline in 2022,” said Louis Taylor, chief executive of the British Business Bank.
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“Unsurprisingly, our world-class universities continue to play a crucial role in this, supporting emerging innovation-led clusters across the UK.
“This year’s Nations and Regions Tracker shows that smaller businesses in coastal towns face several challenges that impact their success, including low productivity and a reduced appetite for external finance. However, coastal towns experience greater than average specialisation in net-zero sectors, evidence that improved access to external finance will enable smaller businesses in coastal towns to expand and further develop innovative climate solutions. We need to ensure that more is done to support these areas, which will in turn help reinvigorate smaller businesses’ resilience and growth ambitions.”
