Equity investment figures in Scotland are cause for some cautious optimism - Susan Nightingale

When it comes to starting and scaling up businesses, Scotland has a strong track record of entrepreneurship that dates back to the industrial revolution of the 18th century when new manufacturing processes helped to create a thriving economy. Today, that entrepreneurial spirit remains, and we have a business landscape largely dominated by small to medium-sized enterprises, employing over a million people.

Susan Nightingale, UK Network Director, Scotland at the British Business Bank

We are an enterprising nation, but we cannot lose sight of how important it is that we provide the right support and environment for our community of start-ups and smaller businesses to prosper. Of course, Scotland would benefit from greater numbers of high-growth businesses in broader economic terms, but it is also about building resilience to weather change and uncertainty, whether that’s due to supply chain disruption, soaring energy prices, or climate change.

In many cases, access to finance could be the answer that smaller businesses are looking for when it comes to aiding growth and development. Selling a stake in a business can be a difficult decision for an owner to make, but equity investment, in particular, can be a valuable opportunity for any entrepreneur to take their business to the next level.

Last year we saw record levels of equity investment in Scotland’s smaller businesses, underlining the nation’s position as an attractive prospect, with a total of £549 million invested across 223 announced deals. Analysis from our latest Small Business Equity Tracker shows that total investment was up 74 per cent compared to the previous 12 months, with strong momentum also continuing into the first three months of 2022. The value of investment between January and March reached £260m, despite economic headwinds causing uncertainty for many firms.

One-tenth of all the UK’s equity deals and a similar proportion (11 per cent) of British Business Bank-backed investments over the past three years took place in Scotland – higher than the nation’s six per cent share of the business population.

The report also includes a review of the top UK hubs for equity investment in terms of location, with three major cities – Edinburgh, Glasgow, and Aberdeen – positioned firmly among the top 20 hot spots for investment activity.

Perhaps unsurprisingly, our capital city, Edinburgh, has been one of the biggest success stories over the last three years and named as the largest hub for equity investment activity outside of London. On average, the city has seen around £195m of equity investment annually, largely led by the business and professional services sector but also boosted by the growing community of start-ups and entrepreneurs in sectors such as tech and life sciences.

Glasgow also featured in the top ten, with a yearly average of £83m investment placing the city in sixth, while Aberdeen ranked joint 14th with £54m of equity investment – predominantly in the energy sector.

Wherever high-growth potential businesses are based in the UK, however, it is more important than ever that they can access funding to support their goals. And that includes all types of finance, including, but not limited to equity investment.

Smaller businesses will undoubtedly continue to play a crucial role in Scotland’s economy in the years ahead, but from what I have seen of late, and from what the figures tell us, there is room for a degree of cautious optimism.

Entrepreneurs starting businesses today are doing so in a very different world, with different markets and challenges, but also with different mindsets. Nevertheless, the ambition for growth remains and access to finance will be a key tool for realising such goals.

Susan Nightingale, UK Network Director, Scotland at the British Business Bank