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The British Business Bank’s fourth Nations and Regions Tracker has found usage of external finance has increased overall across North West businesses; however, sentiment on economic opportunity remains subdued among smaller firms.
Usage of external finance among smaller businesses in the North West saw considerable growth in 2023, with 45% of businesses now leveraging it, up 10 percentage points from the previous year, mirroring the trend seen nationally. Funding levels for smaller businesses, meanwhile, fell across the North West in 2023. The number of bank loans and overdrafts secured by smaller businesses dropped by 7% across the region, with 7,971 provided, and the total value fell by 25% to £1.3 billion. This fall in accessing finance comes as smaller businesses in the North-west typically reported more threats than opportunities in the current economic climate, with 73% reporting having been impacted by rising costs in recent months.
While sentiment remained subdued, many smaller businesses shared being cautiously optimistic about the months ahead. Across the North West, 33% of smaller business owners said they would be willing to use external finance to grow in 2023, up four percentage points compared to 2022. According to the tracker, 32% also said they anticipated needing external finance in the next 12 months, down nine percentage points.
Equity investment across the region has also begun to stabilise in 2024. The North West, similar to much of the UK, experienced a relative slowdown in equity activity in 2023, with 114 equity deals completed, down 31% compared to 2022; the value of these deals also dropped by 67% to £230 million. In contrast, the first half of 2024 has shown encouraging signs of stabilisation. While deal volumes dropped by 2% to 65 when compared to the same period in 2023, deal value rebounded, increasing by 50% to £192 million.
45% of smaller businesses were also found to be investing in R&D across the region, compared to just 39% nationally.
Victoria Mears, Director, UK Network Midlands and North of England at the British Business Bank, commented:
“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. Particularly across research and development, there’s plenty of opportunity for businesses to grow and thrive, and external finance is a great way to capitalise on this.“