Equity investment in small businesses fell last year due to worsening market conditions, but there are some bright spots in the tech space.
The total value of equity funding for UK small businesses fell 11% to £16.7 billion in 2022, due to a significant decline in the second half of the year, according to tracking report. British Corporate Bank’s annual small business equity.
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“The year 2022 proved to be a halving year for small business equity investment, with a record financial gain in the first two quarters of the year, followed by a 47% decline,” said Louis Taylor. in total investment in the second half,” said Louis Taylor, chief executive officer of Corporate Bank of England.
“This decline reflects concerns about overestimation of transactions and the impact of higher inflation and rising interest rates.”
Total transactions fell 7%, down from 2,912 in 2021 to 2,702, the first annual drop in equity trading volume since the Beauhurst data series began in 2011.
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The state development bank said the downturn reflected venture capital (VC) fund managers reducing trading activity and focusing more on business fundamentals, to make up for their investment. investment increased rapidly in the previous months.
However, there are some “bright spots” in the tech space, the British Corporate Bank said.
While overall equity investment in UK tech companies fell 11% last year, clean tech has seen a 50% increase in funding up to 900 million pounds.
Meanwhile, UK investment in nanotechnology has grown by more than 220% between 2020-2022 compared to 2017-19, giving the UK the third largest market share globally.
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“Home to a number of world-class universities and a leading venture capital market in Europe, the UK has expanded into several tech sectors through its venture capital ecosystem. themselves,” said the British Corporate Bank.
“Looking at total VC investment and the UK’s share of the global market, the Business Bank of England analysis shows that the UK performs well across fintech, SaaS (software as a service), science and technology. life sciences and AI, with life sciences one of the UK’s largest sectors in the broader technology portfolio.”
The state-backed bank said it was still more likely to invest in tech businesses than the broader equity market, with 48 per cent of Bank-backed transactions in the sector, compared to the broader equity market. with 42% of the entire market, by 2020-22. It cites programs like the futures fund: breakthrough – successor to the pandemic-era futures fund, which funds innovative, high-growth companies.
“The tech sector is still attracting a healthy amount of venture capital, but it has shown it is unaffected by broader economic conditions,” Taylor said. “It is promising to see clean technology overcome this trend as investors seek to support environmentally sound motivated technology.
“At Corporate Bank of England, we are committed to supporting innovation, ensuring innovative businesses have access to the right capital to start and scale. The data in our latest report shows evidence that this preference is being felt across the small business equity markets.”
It has also been a record year for universities to split, receiving 12% of investment in 2022, at a value of £2 billion.