NEW research from the British Business Bank has found that smaller firms in Scotland saw record levels of equity investment in 2022, despite difficult economic conditions.
The Bank’s annual Small Business Equity Tracker shows that equity deals involving small businesses totalled £762m last year, up 37% on the previous year’s record of £557m.
The University of Edinburgh claimed the third highest number of spinout deals in 2022 after Oxford and Cambridge, with 15 businesses securing equity investment.
The report, published today, reveals that 2022 was a record year for university spinouts, with businesses stemming from academia receiving £2b in funding.
The average deal size for university spinouts across the UK was £8.9m, one-third higher than the wider market.
Businesses in the tech sector experienced notable investment growth in 2022, with the tech sector investment in Scotland rising by 34% in 2022.
In the UK the economic downturn had a significant impact on deal activity in the latter part of 2022 – in fact, the total investment value declined by 11% compared to the previous year.
The total number of deals also dropped by 7%, representing the first annual fall in equity deal volumes since the Beauhurst data series began in 2011.
Beauhurst calculates deal number and investment figures across sectors on weighted counts, ensuring that the aggregation of individual sectors equals the total number of deals and investment overall.
This approach guarantees that if, for instance, a company is in the technology and retail sectors, it will be counted as half a deal in each of the two sectors, rather than being counted twice under each sector.
Despite the market challenges between 2020 and 2022, 8.9% all announced equity deals went to businesses in Scotland, setting a record for Scottish smaller businesses.
Another remarkable result was recorded in 2021, when Scotland ranked top in the UK for the number of announced equity deals in university spinouts.
Susan Nightingale, UK Network Director, Scotland at the British Business Bank, says: “Scotland’s smaller businesses fared well in terms of equity investment last year, hitting a new record despite economic headwinds.
“University spinouts and tech firms continue to perform well, and it is great to see the University of Edinburgh placing just behind Oxbridge as a stand-out success for academic-led businesses.
“It may be too early to see the full impact of higher inflation and rising interest rates on the financial ecosystem, but Scotland is so far bucking the trend for lower deal values that we have seen at a UK level.
“Further financial support for smaller businesses is set to be available next year, with the launch of our new £150m Investment Fund for Scotland, which will continue to help smaller firms access the finance they need to thrive and develop.”
