Small Business Equity Tracker 2024

Our Small Business Equity Tracker 2024 Report provides a comprehensive picture of equity funding conditions for smaller businesses across the UK. The report is intended to inform the development of the Bank’s strategy in making finance markets work better for smaller businesses, as well as informing wider developments in both markets and government policy.

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).