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UK equity investment hits record high

by wrich

1 March 2022: Judith Hartley, CEO of British Patient Capital, comments on the findings of the British Business Bank’s Small Business Finance Markets Report 2021/22.

Highlights: 

  • £14bn was invested over the first three quarters of 2021, a 130% increase on the £6.1bn invested over the same quarters in 2020.
  • Investment in the first three quarters of 2021 exceeded the £8.7bn invested in the whole of 2020, itself a record at the time.
  • Clean tech investment reached £572m in Q1-Q3 across 147 deals, the latter already higher than for the whole of 2020.
  • 58% of 2021 VC deals involved overseas investors, up from 50% in 2021.
  • VC financial returns continue to improve driven by strong exit activity in 2021, including several high-profile public listings.

Judith Hartley, CEO of British Patient Capital, said: “The British Business Bank’s Small Business Finance Markets 2021/22 report, published today, shows what an extraordinary year 2021 was for equity investment. With £14bn invested during the first three quarters of the year alone, it has already surpassed the total for the whole of 2020.

This surge in equity financing is testament to the growing strength and innovation of UK companies, where start-ups and scale-ups across a range of sectors are attracting record levels of capital.

For example, the cleantech sector is attracting increasing levels of investment. With the drive to net zero now firmly established on the corporate agenda, investment into this sector is becoming a commercial reality. Between January and the end of September 2021, 147 cleantech deals completed – a record high – and £572m of equity was invested, a figure likely to rise and surpass 2020’s total of £679m when the full-year figures are published later this year. In British Patient Capital’s own underlying portfolio, we have a number of businesses operating in the sector, such as Xampla, a developer of a plant-based alternative to plastic, and Nyobolt, creators of a new battery technology which delivers high power and ultra-fast charging.

What is especially noteworthy is that the investment in this sector is not just coming from specialist institutions – those with a focus on environmental and/or social impact businesses – but increasingly from non-specialists as well, reflecting a clear and growing awareness of the importance of tackling the climate crisis.

The findings of the Small Business Finance Markets report are further evidence that the UK is a great place for starting and growing a business. We have the VCs, the entrepreneurs, the workforce, the infrastructure and the culture to produce outstanding, dynamic and highly innovative companies.

However, we do still lack home-grown institutional investment. The report shows that 58% of the VC deals completed in 2021 involved overseas funds, up from 50% in 2021. Whilst international interest is still to be welcomed, it is vital that we continue to strengthen the UK market for venture growth funds by encouraging more investment from domestic institutional investors. In this way, ambitious growth-stage founders will have access to a diverse source of patient capital even when global markets may be less buoyant. UK institutional investors, such as pension funds and the individual savers they serve, would also have an increased opportunity to both drive and benefit from the success of our high-growth companies.

The UK is fertile ground for innovation to thrive but a lack of access to patient capital does hold back some companies from scaling up and fulfilling their commercial potential. As the UK’s largest domestic investor in UK venture and venture growth opportunities, we increase access to and availability of this type of long-term patient capital finance, to help build the country’s innovation economy.

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