Private capital, including private equity and venture capital, is making significant economic impacts. Over £27.5 billion was injected into UK companies in 2022. £11.5 billion of this came from international funds.
Private capital’s focus is largely on SMEs, contributing to job creation and innovation. In the North West alone, nearly £1 billion was invested in 2022, with 90% supporting SMEs. This investment led to a 10% increase in job support, amounting to 188,000 jobs in the region.
Significance of Private Capital
Private capital, especially private equity (PE) and venture capital (VC), plays a vital role in boosting the economy. In 2022, over £27.5 billion was invested into UK companies by PE and VC firms. Out of this, £11.5 billion came from foreign funds, showing the global interest in the UK’s economic potential. The majority of this capital goes into small- and medium-sized enterprises (SMEs), which are known for their rapid growth and job creation capabilities.
In the North West alone, private capital investments reached nearly £1 billion in 2022. Notably, over 90% of these investments targeted SMEs, directly supporting 188,000 jobs in the region—a 10% increase from the previous year. Around £256 million of this capital was invested in technology businesses, underscoring the dynamism and attractiveness of the region’s tech sector.
Key Factors for Investment
The North West’s appeal for private capital can be attributed to its substantial number of privately-owned growth businesses, robust infrastructure, and a strong university presence. These factors combine to create a conducive environment for investors and advisors who support ambitious businesses in the region.
According to data from InvestEurope, businesses backed by PE and VC experienced about 6.5% year-on-year job growth up to 2021, compared to only 1.2% for Europe as a whole. This accelerated growth can be attributed to the sector expertise and functional support provided by investors, who amplify their funding’s impact through operating partners and value-creation teams.
Case Study: BES Group
Manchester-based BES Group serves as an illustrative example of how private capital can drive substantial growth. The company, specialising in engineering testing, inspection, certification, and compliance services, was carved out of its listed parent in 2015 with the backing of Inflexion.
At that time, BES Group’s revenues were around £40 million. By the end of this year, the company’s revenues are projected to exceed £200 million. This remarkable growth has been bolstered by 16 strategic acquisitions, 12 of which occurred in the last three years. These acquisitions have expanded BES’s reach and capabilities, supported by a highly skilled workforce of nearly 1,700 people.
Digital Enhancement Through Private Capital
Private capital can also facilitate digital advancements, essential in today’s world. An excellent example is the global consultancy CMS Payments Intelligence (CMSPI), which has more than doubled its EBITDA with PE backing since 2021.
Based in Manchester, CMSPI has focused on technology with the help of its private equity investor, Inflexion. The investment has enabled the company to develop a robust data strategy and proprietary technology, incorporating machine learning to better serve its Global 500 merchant clients. This enhanced capacity has allowed CMSPI to build a massive data lake, boasting over 1 trillion data points as it continues to attract larger global clients.
Effective Partnerships
The success of private capital investments often hinges on partnerships that align well with the business owner’s vision. The best outcomes are achieved when both parties work collaboratively towards a shared goal over several years. This includes refining strategies and building value creation plans that are executed together.
As highlighted by Chris Wright, partnerships thrive when the investor’s approach, experience, and offerings reflect the owner’s vision. Effective collaboration ensures that both parties can work together towards achieving long-term success, refining strategies, and building actionable plans.
Conclusion
Private capital is a significant driver of economic growth, particularly in regions like the North West. With substantial investments funnelling into SMEs, coupled with effective partnerships and a focus on digital enhancement, private capital continues to play a pivotal role in shaping the future of regional economies.
Examples like BES Group and CMSPI demonstrate the transformative power of private capital. These partnerships not only provide financial backing but also offer the expertise and support needed to thrive in a competitive market.
Private capital has shown itself to be an influential driver of economic development, particularly in regions such as the North West. With significant investments targeted towards SMEs and technology, the impact of private equity and venture capital cannot be overstated.
The examples of BES Group and CMSPI highlight how partnerships fueled by private capital can achieve transformative results. Not only do these collaborations provide essential financial support, but they also offer the expertise and strategic direction required for sustained growth in an increasingly competitive market.