Use of external finance in East Midlands increases British Business Bank reports

The report however also found that 55% of smaller businesses in the area view current trading conditions as presenting more threats than opportunities.

Use of external finance rebounds in 2023

External finance usage among smaller businesses saw notable growth across the UK with 11 of the 12 Nations and Regions recording an uptick. East and West Midlands, North East, South East, Northern Ireland and Wales all saw double digit growth.

Businesses in the East Midlands increasingly drew on credit cards as a form of external finance – with 20% of smaller firms utilising this type of lending in 2023, up 9 percentage points on the previous year, one of the highest increases seen.

Nationally, credit cards were also the most used and fastest growing finance type with nearly one in five (17%) smaller businesses using them, highlighting the challenges for businesses seeking external finance.

Cautious optimism among smaller businesses but challenges remain

Smaller businesses showed renewed interest in external finance in 2023, with a growing number using it to seek investments that had previously been delayed.

Of those surveyed 36% said that they would be willing to use finance to help them grow and 34% of the businesses anticipated needing to use finance in the next 12 months, suggesting a continuing growth for the market in the region.

Although inflationary pressures had slowly begun to ease in 2023, the majority (55%) still viewed current trading conditions as presenting more threats than opportunities and over three quarters (76%) were still feeling the impact of rising costs.

Announced equity deals declined, but stabilisation seen in 2024

The UK equity market experienced a decline in the number of announced deals across all Nations and Regions in 2023, reflecting ongoing economic challenges.

The East Midlands was found to be one of the more resilient regions and saw only a 9% decrease in the number of announced equity deals to a total of 58 deals – from 63 the year before.

The number of announced equity deals outside of London fell by 22% year-on-year to 1,098, while total investment dropped by 48% to £3.27 billion.

Nationally, early signs from the first half of 2024 indicate a stabilisation, with a positive outlook for the year ahead. In Q1 2024, equity funding for UK smaller businesses increased by 7% compared to the same period in 2023, pointing towards renewed investor confidence.

British Business Bank driving impact across the UK

The British Business Bank has continued to deliver significant support to smaller businesses across the UK through its debt and equity finance programmes, with a focus on benefitting firms outside of London.

In February 2024, the British Business Bank launched the Midlands Engine Investment Fund II, a £400m fund aimed at unlocking additional funding to help smaller businesses in the Midlands prosper and thrive. In the West Midlands, the fund has so far provided over £1 million to smaller businesses across the region.

The Bank’s geographically-focused funds provided £236 million in equity funding to over 200 companies located outside the capital in 2023, with a particular emphasis on supporting spinouts in regional markets, highlighting its commitment to fostering innovation and growth in the Nations and regions.

Victoria Mears, UK Network Director for the Midlands, British Business Bank said: “Interest in external finance appears to be growing amongst smaller businesses in the East Midlands, indicating confidence in their plans for growth.

“It is important for businesses to access the right kind of external funding for them. The British Business Bank is here to help our region’s founders do just that – and realise their ambitions for growth as they look towards the future.”