The British Business Bank’s inaugural Regions and Nations Tracker published in October confirmed this in even more detail, highlighting Edinburgh’s – and its financial community’s – importance to the Scottish economy. The pairing of companies in the city looking for investment with Edinburgh-based financiers is driving Scotland’s equity market, accounting for nearly half (47 per cent) of total pairings between businesses and investors since 2011. Glasgow was second, with a 16 per cent share, while North Lanarkshire and Aberdeen represented 9 per cent and 5 per cent respectively.
Our report highlighted a wider point about the vibrancy of the Scottish economy and financial sector, too. Scotland’s investor base is the most self-contained in the UK, outside of London – 81 per cent of equity deals over the last decade involved a business and investor from within the country. Just 19 per cent of equity investors in Scottish companies came from other parts of the UK, with London taking the lion’s share at 12 per cent.
Combined with what we found in other parts of the UK, Scotland is in comparatively healthy shape when it comes to access to finance.
Investors are far more likely to invest in businesses close to where they are based, with business and investor being within two hours of each other in 75 per cent of Scottish equity investment stakes over the past decade.
Despite this, there is a longstanding, uneven distribution of growth finance in the UK and much of this is impacted by a lack of local investors.
While this may not be as much of an issue in Scotland’s central belt – demonstrated by the combined 71 per cent share of equity pairings between financiers and businesses in Edinburgh, Glasgow, and North Lanarkshire – it does indicate there may be challenges that need to be addressed in other regions of Scotland.
Another important conversation to be had around business finance is the management of debt, with the Regions and Nations Tracker also highlighting the fact that core debt products such as overdrafts, loans and credit cards are the most used forms of business finance in all regions and nations of the UK.
To support smaller businesses, the British Business Bank has recently produced a guide – Managing Your Business Debt, with advice on managing debt that will help Scottish business owners to make informed decisions about managing their debt. There are many factors to consider, but the first step is the identification of priority debts, highlighting the most urgent payments.
Following that, communication is key, and business owners should talk to their lenders and suppliers as well as investors and directors. Conversations should also extend to expert advisers who can help to address any problems. There are a range of ways to improve cash flow, for instance, that can support businesses to shift from a survival and recovery mode into thinking about future growth.
Scotland has a long track record as an entrepreneurial nation – clearly demonstrated by the thriving number of smaller companies we have today. But tTo make the most of the high growth businesses across the country, and help them manage debt, we need to ensure continued support around business finance and local investment, otherwise their potential may remain unrealised.
Mark Sterritt, UK Network Director, Scotland at the British Business Bank