The Small Business Finance Markets 2022/23 report found that from 2018 to Q3 2022, Scotland accounted for 14% of the UK’s net zero-related SME equity deals. This is double its 7% share of total UK low carbon and renewable energy sector turnover.

Comparatively, London accounted for 36% of net zero-related deals nationally, with a share of low carbon sector turnover of 9%.

Highlighted in the report as one of the many businesses securing net zero equity deals in recent years was Celtic Renewables — the Edinburgh-headquartered company whose patented technology converts by-products from the scotch whisky industry into biofuels.

These latest findings back up one of British Business Bank’s prior reports, Nations and Regions Tracker: Small Business Finance Markets 2022, which named Edinburgh as the top local authority for net zero deals, bringing in investment of £186 million through the 92 deals made between 2011 and Q2 2022.

Today’s report also outlined that, even in the face of a turbulent economy, Scotland saw a 26% increase in the announced equity investment value — totalling £525m — during 2022’s first three business quarters when compared with the same period in 2021.

While Scotland did see a decline in the total number of announced equity deals in 2022 compared to 2021 — from 178 down to 151 — this wasn’t exceptional, and was in line with much of the wider UK.

What’s more, overall demand for external finance has fallen across the UK, the report says, with the number of smaller businesses accessing external finance dropping to 33% in 2022 compared to 2021’s 44%.

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On the report’s findings, Susan Nightingale, UK network director at the British Business Bank, commented: “Today’s report shows how small businesses are adapting to a challenging economic climate, as they reduce their use of external finance.

“Nevertheless, there are promising signs of growth in the net zero deal sector as equity finance markets respond to growing demand for investment in green innovation.

“Scotland has always been a hub for net zero sectors and it is highly encouraging to see that the country is also a leader in funding these industries.

“However, smaller businesses unable to transition to a low-carbon economy to keep up with regulation or competitors could face significant challenges and may also struggle to secure investment in the future, as more financial institutions begin reflecting ESG in their lending criteria and decision-making.”