Investors are walking the talk for Scottish businesses - Mark Sterritt

The pandemic has taught us many things, but one of the clearest lessons from an economic perspective has been the importance of innovation. Whether it was the development of vaccines, the increased reliance on IT to keep businesses functional, or the use of tools such as temperature checks at restaurants and pubs, we have seldom relied more on the tech community.

Mark Sterritt, UK Network Director - Scotland at the British Business Bank

Perhaps it should come as no surprise, then, that our analysis of the latest available data from high-growth tracking company Beauhurst found that equity investment in smaller firms in Scotland’s burgeoning tech sector was £163 million by the third quarter of last year – 36 per cent higher than the total for the whole of 2020.

Smaller businesses in the life sciences industry saw investment worth £61m over the same period, 42 per cent higher than in the full 12 months of the previous year. It was the most popular destination for investment in tech-focused smaller businesses in Scotland, with a 37 per cent share of total investment volumes, as the pandemic piqued interest in healthcare technology.

Life sciences was followed by the software sector, which represented nearly one-quarter (23 per cent) of investment in smaller tech firms in Scotland. Attracting £37m in the first nine months of the year, software businesses were on track to exceed the £43m of investment they received in 2020, suggesting that investor appetite for the industry remains strong.

Of course, the other big event of 2021 – particularly from Glasgow’s perspective – was the COP26 UN climate change conference. In the first nine months of the year building up to COP26, smaller businesses in Scotland’s clean technology sector received £24m of investment, four times the £6m recorded during 2020, with another quarter still to be captured.

These findings follow the British Business Bank’s Small Business Finance Markets report, which recently found that total equity investment in Scotland’s smaller businesses had reached £403m during the first three quarters of 2021 – exceeding the entire previous year’s £279m by 44 per cent.

There are clear headwinds in the form of cost inflation, supply chain pressures, and geopolitical tension, this may create uncertainty in demand for finance such as working capital and asset finance. For those companies who have been able to move from survival mode, equity investment may represent a viable option to support their growth plans.

Wherever high growth potential businesses are based in the UK, it is more important than ever that they can access funding.

We have a range of programmes across the country to address geographical funding gaps – with details of our dedicated £150m investment fund for Scotland to be announced in due course. Last year we also launched the Future Fund: Breakthrough programme to support innovative smaller businesses across Scotland and the UK.

It is highly encouraging to see a significant increase to equity investment in Scotland’s smaller tech businesses – these are high-growth, innovative firms that will help drive the wider economy in the years ahead. But, it is even more exciting to see investors walk the talk by deploying increasing amounts of capital in Scottish businesses looking to make positive change for human health and the environment, in particular.

Mark Sterritt, UK Network Director, Scotland at the British Business Bank