North East smaller business equity investment declines as economic conditions bite

Total announced equity investment into smaller businesses across the North East of England declined by 40% to £91m in 2023, driven by a nationwide slowdown in activity. The volume of equity deals also declined in 2023, falling by 23% to 58 deals. This is according to the British Business Bank’s annual Small Business Equity Tracker, published today.

Deals in the North East made up 2.7% of overall UK-wide equity market activity between 2021 and 2023. The recent launch of the Northern Powerhouse Investment Fund II (NPIF II), which has been expanded across the North East, will allow the Bank to increase the funding it provides to entrepreneurs in the region.

These findings reflect those across the UK. Following the market downturn in the middle of 2022, equity investment for smaller businesses has returned to 2019 levels in 2023. Full-year data shows that investment declined by 48% to £8.8bn. Despite this, UK equity investment remains 182% higher than a decade ago. The UK has also overtaken India as the third largest venture capital (VC) market in the world, behind only the US and China, and accounted for nearly 6% of global VC investment between 2021-2023.

Shaun Fooy, Senior Network Manager for the North East of England at the British Business Bank, said: “The last couple of years have been increasingly difficult for businesses operating in the UK, which has resulted in a decline in equity investment both nationally and in the North East. Despite this, the North East's business community has remained resilient and is continuing to boost regional economic growth.”

“At the British Business Bank, we are committed to supporting ambitious businesses in the North East of England, providing them with the funding they need to thrive. Particularly with the launch of NPIF II, which has now been expanded across the whole of the North East, we’re poised to continue supporting a whole host of businesses across the region, providing access to finance to those who may have otherwise been unable to secure funding.”

Louis Taylor, CEO of the British Business Bank, said: “As has been the case globally, 2023 was a tough year for the UK equity finance market. However, despite the continued challenges of higher interest rates and fewer exit opportunities, it is encouraging that investment now looks to be stabilising at over £2bn per quarter for smaller businesses.

“The UK has also become the third largest venture capital market in the world, overtaking India, and is the largest market in Europe, accounting for more than a third of investment across the continent. This demonstrates that the UK is building on its position as a global leader in venture capital, and this presents a substantial opportunity for both domestic and international investors.”