Catherine Lewis La Torre, the chief executive of British Business Bank, warned that lower flows of finance into some UK regions was holding back ambitious entrepreneurs and leading to wasted economic potential. She said the British Business Bank was committed to tackling this regional imbalance.
The British Business Bank’s first annual Regions and Nations Tracker, which is published today, highlights the dominant role played by London-based enterprises in the battle to attract investment.
A spokesman said: “Leeds was identified in the top 20 local authorities in the UK for equity activity, accounting for 1% of all UK deals between 2011 and 2020.
“However, the report highlighted the lack of uptake of equity finance in Northern regions, with Yorkshire and Humber accounting for just 1.5% of national equity investment, despite hosting 7.2% of UK businesses. London accounted for 62% of equity investment and 19% of the business population.
“Leeds and Sheffield are the epicentres of the equity ecosystem in Yorkshire and the Humber in terms of recipient businesses, accounting for 26% and 18% respectively – compared with Scarborough and Richmondshire with the lowest at just 1% of equity deals in the region.”
The report revealed evidence of a strong local funding “ecosystem” in Yorkshire with the investor having an office within two hours of businesses’ headquarters for 56% of the pairings.
Access to growth finance is particularly difficult for rural business owners who are more likely to resort to injecting personal funds into their businesses, especially in the construction sector, the report concluded. The report found that 38% of rural construction business owners used personal funds compared with 27% of their urban counterparts
The report argues that investors with a local presence are critical to the success of UK equity ecosystems.
Ms Lewis La Torre added; “There is a lot of wasted potential and wasted economic activity. If equity investment is the rocket fuel that drives prosperity, we are missing out on jobs and productive growth throughout the UK economy.
“We have invested a total of £943m outside London over the last financial year, which is above our target of £868m. We are providing investments in places that really need it.
"We’re building ecosystems with investors, companies and intermediaries and we know what doors to knock on. We have set up a regional angels programme to invest in clusters around the country.”
The British Business Bank is the Government’s economic development bank.
Ms Lewis La Torre added: “There are lots of businesses out there that really require equity funding but don’t see it as an option.”
She added: “There is evidence that companies based in rural areas have to work harder and have to invest personal funds more often than companies based in major cities.”
The bank is looking to build networks to create “warm introductions” between firms and potential investors.