The British Business Bank’s annual Small Business Equity Tracker reports that the South East region had the second-highest investment value in 2023.
£866m was invested in 2023, second only to London but 56% lower than the previous year, while the number of announced deals dropped by a quarter (26%) to 196.
The numbers reveal that the South East performed broadly in line with the overall UK market in 2023, where equity investment for smaller businesses returned to 2019 levels.
Full-year data shows that investment declined by 48% to £8.8bn in 2023 in the UK, in line with other equity markets, while the number of deals fell by 25% to 2,152.
Steve Conibear, UK network director at the British Business Bank, said: “This year’s Small Business Equity Tracker report shows that within the UK’s investment landscape, the South East region continues to offer thriving investment opportunity and potential for small business growth with the second highest level of investment value in 2023, outside of London.
“The British Business Bank will continue to support smaller businesses located in the South East region, ensuring the availability of secure finances is always a priority.”
Equity investment for smaller businesses returns to 2019 levels
As has been the case in other markets, a tighter macroeconomic environment and heightened interest rates continues both to affect the relative attractiveness of the asset class and hamper exit opportunities for UK companies.
However, equity investment for smaller businesses has remained at over £2bn in each of the last five quarters, demonstrating some stability in the market.
While the equity market has seen two consecutive years of contraction, investment values have increased by 182% over the last 10 years, with deal numbers 42% higher.
Since 2014, more than 21,000 equity deals have been completed, collectively providing over £90bn of equity finance to support the growth of innovative smaller businesses.
British Business Bank more likely to support tech and university spinouts
Between 2021 and 2023, the British Business Bank supported 15% of UK equity deals and 18% of total investment through its equity programmes. This represented a slight increase from the 2020-2022 period, when 13% of deals and 15% of investment was backed by the Bank.
The bank’s programmes have focused on financing innovative high-growth companies. During 2021-2023, 48% of Bank-supported deals were in the technology/IP-based sector, compared to 42% of deals across the overall market.
The bank is also more likely to fund university spinouts. These accounted for 13% of Bank-supported deals, compared to 9% across the wider market, with the leading contributors being British Business Investment’s Regional Angels Programme, the Managed Funds Programme and British Patient Capital.
