In recent times, the North West has witnessed a rejuvenation in its business environment as more enterprises resort to external financing. This shift indicates a cautious optimism despite lingering economic challenges.
The British Business Bank’s report showcases this upward trend, indicating that a significant number of businesses are turning to external finance to facilitate growth amidst a challenging economic landscape.
Rising Use of External Finance
The British Business Bank’s latest report highlights a notable trend in the North West: an increased use of external finance among businesses. In 2023, usage rose to 45%, marking a 10 percentage point climb from the prior year. This mirrors trends seen across the UK, where 46% of smaller firms have turned to external finance, marking another 10 percentage point increase nationally.
Despite this growth in finance usage, overall sentiment among smaller businesses in the region is gloomy. A significant 63% perceive more risks than opportunities in the current trading climate. Furthermore, inflationary pressures add to these challenges, impacting 73% of smaller enterprises with rising costs across recent months.
Subdued Sentiment Persists
Funding for smaller businesses in the North West experienced a downturn in 2023. The number of secured bank loans and overdrafts fell by 7%, with only 7,971 granted. At the same time, the total value of these financial aids saw a 25% decrease, plummeting to £1.3bn.
However, a cautious optimism remains. It’s noted that 33% of business owners are open to using external finance for growth, which is a slight increase from 29% the previous year.
Equity Investment Dynamics
Equity investment activity showed signs of recovery in the initial half of 2024. Notably, while the number of deals in the North West fell by 2%, the value of these deals rebounded, climbing by 50% to £192m.
In 2023, the region had seen a substantial slowdown in equity activity, marked by a 31% drop in completed deals and a striking 67% decrease in deal value, down to £230m. This balance in 2024 gives a glimpse of hope for the coming months.
As equity investment begins to stabilise, businesses might find renewed opportunities to secure necessary funding and propel their growth plans.
Research and Development Advancements
In comparison to the national average, the North West shows a greater commitment to research and development. Approximately 45% of smaller firms in the region are investing in R&D, outstripping the 39% national average.
There is also significant engagement in new-to-market innovations, with 30% of businesses in the North West pursuing breakthroughs that could position them favourably in the market.
Such investments highlight a proactive approach among North West businesses, fostering potential for sustained growth and competitive advantage.
Role of British Business Bank
The British Business Bank has been instrumental in supporting North West businesses through its debt and equity finance programmes. A pivotal initiative, the £660m Northern Powerhouse Investment Fund II, was launched in March 2024, aiming to spur economic growth across the north by backing innovation and creating local opportunities.
The bank’s Start-Up Loans programme also saw significant uptake, with 1,272 loans disbursed in the year ending March 2024, a rise of 17%. The total value of these loans surged by 20% to £17m, empowering emerging entrepreneurs.
Future Prospects for Growth
Despite current challenges, there is potential for growth in the coming months. Businesses show cautious optimism towards external financing, which could act as a catalyst for expansion.
Victoria Mears, a director at the British Business Bank, remains optimistic: “Businesses in the North West, and indeed across the UK, have had to grapple with a more challenging economic environment over the last few years, so it’s encouraging to see some optimism returning across the region.”
With a strategic focus on research and development, and backed by comprehensive funding programmes, North West businesses might soon experience a resurgence in growth and innovation.
Overall, while challenges remain, the increased use of external finance and strategic investments in innovation offer promising pathways for future growth.
With strong support mechanisms in place, businesses in the North West are well-positioned to navigate the complexities of the current economic climate.
