The South West was one of just two English regions to see an increase in equity deals in 2022, with three deals a week completed on average with a total value of more than half a billion pounds.
The British Business Bank’s annual Small Business Equity Tracker, published 15th June, shows that 155 equity deals were completed in the South West last year, an increase of 4%. Yorkshire and The Humber and Wales were the only two other nations or English regions that saw an increase in deal numbers.
Despite this, overall deal value in the South West was down by almost a third (32%) to £540m following a record year in 2021, which included several £50m-plus deals. Nationally there was an 11% decline in total UK investment value to £16.7bn, driven by a downturn in market conditions.
The total number of UK deals also saw a modest 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.
Steve Conibear, UK Network Director, South West at British Business Bank said, “In the South West deal volumes held up well compared to nationally, but values fell, reflecting the wider market. Encouragingly however, the Bank’s geographically focused programmes are playing an important role in increasing access to SME equity finance. Our regional fund in Cornwall and Scilly supported a third of all equity deals in that area in 2022 and we will shortly launch our £200m South West Investment Fund. This is the first of our £1.6bn Nations and Regions Investment Funds and covers the whole of the South West, offering equity investments of up to £5m.”
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.
Nationally, growth stage investment declined by 25% to £8.2bn in 2022 and was 54% lower comparing the first and second halves of the year. A key reason for this has been the lack of exit opportunities via trade sales or public listings, causing investors to avoid larger deals as they attempt to preserve their capital.
This overall trend has continued into the first three months of 2023, during which £2.2bn was raised by UK small businesses – a 28% drop in investment value compared with the last quarter of 2022.
A record year for university spinouts: University of Bristol and Falmouth University performed well.
The creation of spinout companies is an important avenue through which founders and universities can commercialise cutting-edge academic research. The development and increasing financing of these spinouts highlight the important role they play in creating high-growth, innovative companies in the UK.
University spinouts received a record 12% of total equity investment in 2022, at a value of £2bn. The average deal size for university spinouts was £8.9m, which was 33% higher than the wider market. Of all equity deals in the UK in this year, 8% were in university spinouts, totalling 226 deals. The South West saw 12 spinout deals worth £33.8m.
Cleantech investment strong in the South West
While tech companies continue to receive the majority of UK equity finance, overall investment value in the sector fell by 11% in 2022. Certain sub-sectors still experienced investment growth during the year, despite the decline in overall small business equity finance. The cleantech sub-sector in particular bucked the trend of the wider market, with equity investment in this area increasing by over 50% to £0.9bn.
For the full report visit: https://www.british-business-bank.co.uk/small-business-equity-tracker-2022/
Pictured above: Steve Conibear, UK Network Director, South West, at British Business Bank