Equity deals in the UK were on the decline in all nations and regions in 2023, but early signs from the first half of 2024 indicate stabilisation.

This is according to the latest Nations and Regions Tracker from the British Business Bank, which tracked the financial performance of all 12 nations and regions in the UK.

In the first quarter of 2024, equity funding for smaller businesses increased by 7% compared to the same period in 2023, suggested renewed confidence among investors.

Equity Deals

While London came out on top, Scotland had the second most announced equity deals per high growth enterprise (HGE), coming above the UK average.

Scotland also performed well in terms of the value of announced equity deals, with the third largest monetary amount, behind the East of England, and London which again came in the lead.

The Bank cited Edinburgh as of particular importance to Scotland’s success in this area.

Further Scotland was one of the only UK nations/regions to experience an increase in deal activity relative to the first half of 2023.

Overall, trends show that while equity activity is still in a general downward trend since mid-2022, the data from the first half of this year shows signs of recovery.

External Finance

In terms of external finance, usage among smaller businesses saw notable growth in 2023, with 46% of businesses now leveraging it, an increase of 10% from the previous year. Growth rates in Scotland were modest.

Further, the report found an increasing reliance on credit card usage with nearly one in five (17%) of businesses making use of credit cards, followed by bank overdrafts (13%), and leasing and vehicle finance (12%), highlighting the challenges of finding external finance.

Smaller businesses were showing renewed interested in external finance in 2023, with a growing number using it to seek investments that had been delayed before.

Between 2021 and 2023, fewer than half (44%) across the nations and regions had identified and made any investments in their business.

Although inflationary pressures have slowly begun to ease, the majority (61%) still viewed current trading conditions as presenting more threats than opportunities and over three quarters (76%) were still feeling the impact of recent increases in costs in 2023.

Recommended reading

• Scottish National Investment Bank’s Income Grows by More Than 80%
• Rising Tax Fears Grip Scottish Business
• Edinburgh Uni Surpasses Innovation Goal By Fourfold
• Scots Business Confidence Takes a Downturn

Loans and Overdrafts

While the distribution of core debt finance forms such as terms loans and overdrafts across UK nations and regions is less imbalanced than other finance types, location-specific challenges remain.

Scotland is one of the leaders in terms of the highest concentration of bank loans and overdrafts relative to the size of its small business populations, though this was largely driven by the strong presence of finance-reliant sectors like agriculture and manufacturing.

However, things may be turning around in 2024, as early signs suggest a more promising outlook. The first half of 2024 saw a 21% increase in the volume of approved loans and overdrafts compared to the first half of 2023.

“While we continue to face a challenging economic environment, it is encouraging to see a renewed appetite for external finance among the business community,” Louis Taylor, CEO, British Business Bank, said.

“This year’s Nations and Regions Tracker captures a mood of cautious optimism throughout the UK, and one which will hopefully see an uplift this year and beyond.”