The British Business Bank’s first annual Regions and Nations Tracker published today, shows that economic potential in the North East continues to be wasted.

The report says that is because of regional disparities in access to equity finance and private debt. Overdrafts, loans and credit cards are the most used forms of business finance in all regions and nations of the UK, but equity finance and private debt can support companies with the potential for rapid growth.

The report highlighted the lack of uptake of equity funding in Northern regions. While the North East accounted for just 2.3% of national equity investment compared to its 2.7% share of UK businesses. In contrast, London accounted for 62% of equity investment and 19% of the business population.

Catherine Lewis La Torre, CEO of British Business Bank, said: “The lower flows of finance in certain regions and localities reflect a population of businesses operating with fewer choices. This is something that British Business Bank is committed to changing.

"This research shows that entrepreneurs in the North East are capitalising on the vibrant local investor economy, with the largest portion of deals happening within the region.”

The Bank remains committed to addressing regional imbalances in access to external finance. 86% of businesses supported by British Business Bank’s programmes are based outside of London, with £943m invested between 2020 and 2021.

In the North East, the Bank’s core programmes are supporting £212.9m of finance, reaching 1,989 smaller businesses

Across its regional funds, a record deployment of £357m of finance was recorded this year principally due to a strong second half of 2020/21.

Since its launch, the £500m Northern Powerhouse Investment Fund (NPIF) has invested more than £256m into 840 SMEs, with £310m in private capital leveraged alongside.

The Regions and Nations Tracker found the North East has the third highest proportion of within-region investments of all UK regions and Nations. 66% of equity investment stakes in North East companies involved an investor within the region, behind only London and Scotland at 90% and 81% on the same measure.

The tracker found that investors are more likely to invest in businesses close to their office, with 73% of investors in North East businesses within two hours of the investee businesses and 64% within one hour – the second highest region in the country after London.

Newcastle and County Durham are the epicentres of the equity ecosystem in the North East in terms of recipient businesses, accounting for 34% and 17% of deals since 2011 respectively – with a stark contrast of just 1% of equity deals in the region happening in Hartlepool.

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 found 38% of rural construction business owners used personal funds.


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