It’s difficult to imagine Stephen Welton, the chief executive of the Business Growth Fund (BGF), in a Gymbox, a company whose Twitter biography reads: “We believe that going out and working out should be one and the same thing, and that hot and sweaty exercise should be pure unadulterated entertainment.”
“I don’t know if you’ve been to a Gymbox?” asks Welton. I haven’t. “It’s quite edgy, it has a New York, metropolitan style. Most of them have a huge great boxing ring in there, which makes it quite different.
“In the evenings they have live DJs. So you have a mixture of music and sport. People who go there are quite serious about being fit, and completely muscle-bound. But they’re not just occasional fitness freaks, they’re actually regular users of those gyms.”
Why is a 50-something chief executive with a passion for magic tricks (he is a member of the Magic Circle) interested in Gymbox?
Because he believes it is one of the big success stories of the BGF, a company founded five years ago – with the backing of Barclays, HSBC, Lloyds, RBS and Standard Chartered – to invest in, and grow, small and medium sized businesses.
“From when we got involved in it, we’ve doubled the size of that business, and I think we’re just at the beginning of the potential.”
No Brexit brakes
Since its 2011 launch, BGF has invested around £900m into small businesses: £10m in the first year, £100m in the second and £300m in the last 12 months, Welton says.
And there have been no Brexit brakes put on here. He says the period after the EU referendum has been the busiest in BGF’s history, with £56m invested across 11 businesses since 24 June.
“There are a couple of reasons for that,” says Welton. “I couldn’t say that everybody, post-Brexit, knocked on our door and said: ‘We must get some money immediately.’ The reality is that the momentum [has built] over the last five years and the last 12 months, so we’re talking to so many businesses.”
He adds: “It shows the strength of the model, as much as anything else. The other thing it shows, which is important for us as an investment organisation, is no loss of nerve.
“Because we could quite easily, post-Brexit, have thought: well, what does Brexit mean for this company? And what does it mean for that company? And is the UK economy going to slow down? Should we sit back and wait a little bit to try and understand what our relationship’s going to be with Europe and whether the economy’s going to slow dramatically?
“And the answer is: we don’t know. But one thing we do know is that if everybody takes that attitude we will have a recession.”
The Dragons’ Den generation
Welton, a Durham University law graduate who previously worked in private equity for JP Morgan, believes there has been a cultural shift towards entrepreneurship in the UK over the last five years.
“When you left university you maybe didn’t think with all of your colleagues or contemporaries that you’d go and start up a business,” he says. “Whereas I guarantee you graduates now would think about that.”
And, unfortunately, some of the credit for that might have to go to Duncan Bannatyne. “Whether you like a programme like Dragons’ Den or not – because it’s quite showbiz and it’s very mass market at one level – but it is shining a light on [how] it’s quite cool to be an entrepreneur. People like Dragons’ Den.”
But this entrepreneurial “ecosystem”, he says, may be in danger after the Brexit vote.
“If there is a risk, it is that the ecosystem starts to lose confidence. And people think, coming out of Durham, maybe I won’t be an entrepreneur, I’m going to go and join PwC because it’s a little bit safer. That would be my one worry, that we start to lose some of that confidence and self-belief.”
Welton says that when BGF was founded, there were doubts it could work. “When we started people thought this would be a flop, it would never work because there aren’t any companies to invest in.
“Well, £900m later, I think we can say that was wrong [and] I personally think we are at the beginning.”
He adds: “We are creating a market. So I look at the £900m we have invested, that’s £900m that would not have been invested had BGF not been created. And that’s something I’m very proud of.”