British Business Bank: North West small business equity investment declined 22% in 2022 driven by a UK-wide downturn in market conditions in second half of the year.

• Following a record year in 2021, the number of equity investment deals in the North West fell in 2022 by 7% to 162, with the total investment value declining 22% to £685m

• The total value of equity investment in the North West’s small businesses declined by 22% to £685m in 2022

The total value of equity investment in the North West’s small businesses declined by 22% to £685m in 2022, driven by a downturn in market conditions, reveals the British Business Bank’s annual Small Business Equity Tracker, published today.

2021 was an exceptional year for equity deals in the North West’s smaller businesses, with £882m of investment across 175 deals, driven by activity in the business and professional services sector.

The findings in the North West reflect those across the UK. The total number of deals across the country also saw a decline of 7%, falling from 2,912 in 2021 to 2,702, the first annual drop in equity deal volumes since the Beauhurst data series began in 2011.

Dr Sophie Dale-Black, UK Network Director for the North of England, British Business Bank, said:

“The last few months have certainly been challenging for businesses in the North West. However, the strength of the region’s universities, a hotbed for equity investment, should be a source of optimism. The British Business Bank, and our regional delivery partners, are well poised to support businesses in the North West with significant growth potential.”

The downturn reflects venture capital (VC) fund managers reducing their dealmaking activity and focusing more on business fundamentals, to compensate for the rapid capital deployment in previous months.

Between 2020 and 2022, British Business Bank’s equity programmes supported 13% of all equity deals and 15% of total investment. This represents a slight decrease from the previous 2019-2021 period, driven by the growth stage of the market, in which there were some large investments during the first half of 2022 without involvement from the Bank. However, the proportion of equity deals and investment supported by the Bank was 9% and 13% respectively in 2016-18, showing that its current market share remains higher than historical levels.

Overall, the Bank remains more likely to invest in tech businesses than the wider equity market, with 48% of Bank-supported deals in the sector, compared to 42% across the overall market, in 2020-22. Furthermore, 12% of all Bank-supported deals were for university spinouts, compared to 9% of wider market deals.

Additionally, an increasing proportion of Bank-supported deals are funding diverse teams, with 26% of deals going to companies with at least one female founder, highlighting the Bank’s commitment to supporting an innovative and diverse VC ecosystem.

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