Equity investment into smaller UK businesses grew by 9 per cent last year despite the combined headwinds of Covid-19 and the UK’s departure from the European Union.
The total of £8.8bn is the highest recorded since the British Business Bank started tracking the data ten years ago.
The Bank also revealed that it had supported some 21 per cent of all UK equity deals in 2020, largely due to the launch of the Future Fund.
The Future Fund is particularly focussed at start-ups and scale-ups who investors believe are set for fast growth.
The record growth seen in 2020 appears to have covered over into the first quarter of 2021, with £4.5bn-worth of equity investment going into UK firms in those three months alone.
Stepping in when needed
The Bank’s CEO Catherine Lewis La Torre suggested the state-backed operator’s large footprint in 2021 was due to its “counter-cyclical” role.
“We think there is a case for Government intervention (but) to be catalytic,” she told City A.M. in an interview.
“Hopefully (we are) crowding in capital. We certainly don’t want to be displacing private capital in that space,” she says in answer to critics of those who wonder whether the Bank has become too much of a player in the space.
Lewis La Torre is also clear that the UK’s potential in areas like science and deep tech is worth nurturing.
“I think we have some amazing science in the UK that we can build on.
“I think we have a really good ecosystem around the VC community, certainly more developed than some other European countries.
“They’re great things to build on” she says.
Deep Tech boost
The numbers also suggest that investment in deep tech is a growth industry amongst UK equity operators.
Investment in such firms is up 291 per cent in just five years, streets ahead of increases in the rest of Europe and the US.
But the UK still lags its cross-Atlantic cousin, with the average raise after six rounds sitting at £24m compared to the £113m raised by similar American firms.
The Bank is set to launch an offshoot from the Future Fund, called Breakthrough, which they hope will crowd-in additional capital.