The commercial arm of the government-backed British Business Bank has invested in a record number of firms but its rate of return has more than halved due to the pandemic.
The British Business Investments (BBI) annual report shows an additional 15 commitments totalling £547m in the year to 31 March 2020. It brings the total portfolio investments to 59, through 48 different delivery partners.
Cumulative commitments are up 26 per cent year-on-year to over £2.5bn. On top of this third parties invested a further £11.8bn alongside the BBI investment, producing total funding of almost £14.4bn.
BBI was set up six years ago to support the development of more diverse debt and equity finance markets and provides funding to finance providers, including peer-to-peer lenders and challenger banks.
This year, the BBI supported more than 37,000 SMEs, an increase of nearly nine per cent year-on-year. Among investments include a £15m commitment to Manchester-based fintech Assetz Capital, a property-focused marketplace lender.
The BBI has also invested £30m in peer-to-peer lender Funding Circle to lend to small businesses through its platform.
The lender recently reported an operating loss of £113.5m in the first half of the year, more than three times the £31.3m loss it posted for the same period last year.
The impact of the pandemic on SMEs has had a knock on effect on BBI. The investment vehicle said it had been on track to achieve its targeted gross return on invested capital of 5.6 per cent this year. But due to valuation adjustments and additional expected credit loss provisions as a result of the pandemic, the return for the year was 2.7 per cent.
In the year to 31 March 2020, BBI delivered gross income of £35m, down from £81m in the previous year. Profit before tax also slumped from £70.8m in 2019 to £22.2m this year due to the impact of the pandemic.
“Excluding the exceptional impact of Covid-19 on our financial return, British Business Investments has once again delivered on its overall objectives,” said BBI chair Francis Small. “The Covid-19 pandemic has had a devastating impact on many of the UK’s small and medium-sized businesses. We have worked closely with our delivery partners and have increased our commitments to them, as they have continued to provide essential finance to the UK’s SMEs.”