Small Business Equity Tracker 2024

This year, the tenth edition of the report, consists of four sections covering:

• Chapter 1: Recent trends in SME equity finance
• Chapter 2: British Business Bank activity
• Chapter 3: International competitiveness of the UK VC market
• Chapter 4: Assessment of UK equity market gaps

Key findings:

Following the market downturn in the middle of 2022, equity investment for smaller businesses has fallen to levels previously seen in 2019

• After a strong year in 2022, equity investment in UK smaller businesses declined by 48% to £8.8bn in 2023. The number of announced deals also fell by 25% to 2,152.
• However, on a quarterly basis equity investment has remained just over £2bn for the past five consecutive quarters, demonstrating some stability in the market.
• London accounted for 63% of investment and 49% of deals in 2023. The number of deals declined across all regions and devolved nations in 2023, though activity in the East Midlands and Wales was the most resilient.
• University spinouts raised £1.3bn in 2023, the third highest year on record and equivalent to 15% of total investment across the market.

Over the past decade the UK has overtaken India as the third largest VC market in the world, now accounting for 5.8% of global investment

• British Business Bank analysis for this report finds that, between 2021 and 2023, UK companies raised £72bn in VC investment, behind only the US and China.
• The UK has also strengthened its international position over the past decade. Its share of global VC investment has risen from 3.4% in 2014-2016 to 5.8% in 2021-2023 – the largest increase of any of the top 12 global markets.
• The UK now attracts 11.3% of global fintech investment, and has also increased its market share in software (6.2%), green tech (4.5%) and deeptech (3.8%).

The UK has narrowed its overall market gap with the US, but sectoral gaps remain in life sciences and deeptech industries

• When adjusting for the size of the economy, the UK now raises the same amount of investment as the US (at 0.97% of GDP in 2021-2023). This has largely resulted from cyclical fluctuations since the pandemic.
• The sectors in which the UK has the largest gap on a GDP-adjusted basis include life sciences, where the US raised 1.6x more investment in 2021-2023, R&D intensive sectors (1.4x) and deeptech (1.3x).
• In green tech and software sectors the UK now performs in line with the US, and in fintech the UK now outperforms - deploying twice as much investment as the US in 2021-2023 after controlling for the size of the economy.

The Bank has supported 15% of UK smaller business equity deals between 2021-2023, with a high proportion in tech companies and university spinouts

• The Bank’s equity programmes supported around 15% of UK smaller business equity deals and 18% of total investment between 2021 and 2023.
• The Bank’s programmes have focused on financing innovative high-growth companies. During 2021-2023, 48% of Bank-supported deals were in the technology/IP-based sector, compared to 42% of deals across the overall equity market.
• University spinouts accounted for 13% of Bank-supported equity deals during 2021-23 (compared to 9% across the wider equity market).