The British Business Bank’s third annual Nations and Regions Tracker finds the use of external finance among smaller businesses in Northern Ireland is showing signs of recovery in early 2023, after a decline the previous year.
It also reveals that Belfast punches well above its weight in terms of Technology/IP-related equity deals per high growth business; at 2.7. This is only exceeded by Dundee, Edinburgh, and the Golden Triangle clusters (ranking 6th overall).
Around 38% of smaller businesses in Northern Ireland were using external finance in 2022, down from 45% in 2021. The share of businesses across the UK using external finance in the same year was 36%, down from 43% the year before.
More recent data suggests that external finance was picking up in the early part of 2023 across the UK, including Northern Ireland.
Bank loans in Northern Ireland saw the largest fall in 2022 down to 12% from 20% in 2021. This was closely followed by grants (-6 percentage points).
Core debt products remain the most common finance types with 13% of local smaller businesses using credit cards and 12% using bank loans.
There was a significant fall in equity deal numbers in 2022 with a 17% drop in Northern Ireland compared to 7% across the UK. Meanwhile, the investment value here bucked the UK-wide downtrend (-11%), growing by 39% over the same period however, this was being attributed to the effect of a few large size deals completed in 2022.
The report also found that in 2022, the combined Nations and regions outside of London recorded their first year-on-year decline in the number of equity deals since Beauhurst’s data collection began in 2011 (-10%), with the total investment value in these areas also falling (-11%).
The overall outlook for 2023 is more encouraging with the rate of decline beginning to ease, with asset finance remaining well spread across the UK Nations and regions, based on British Business Bank programme data.
Northern Ireland is home to one innovation-led cluster located in Greater Belfast, in which academic spinouts are key players.
The Greater Belfast cluster relies significantly on the contribution of academic spinouts from Queen’s University and Ulster University to the local equity investment ecosystem.
Belfast-based spinouts are predominantly specialised in the life sciences, but also capture sizeable shares of the UK equity market in other technology areas, such as metamaterials and digital security.
The Bank’s analysis further shows that spinouts based in this cluster complete smaller deals on average than their counterparts based in other UK clusters, also taking longer than most to secure their first announced deal. Spinout deal activity in the Greater Belfast cluster also relies more on government investors compared to the majority of other UK clusters.
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Susan Nightingale, Director UK Network at the British Business Bank said: “We are seeing promising signs that the use of external finance among smaller businesses is recovering after a decline in 2022.
“Unsurprisingly, our world-class universities continue to play a crucial role in this, supporting emerging innovation-led clusters across the UK.
“The Greater Belfast innovation-led cluster plays a significant role in supporting communities and it is important to note that a relatively large proportion (22%) of Technology/IP-related equity deals between 2011 and Q2 2023 were completed by businesses based within the 10% most income-deprived areas in Northern Ireland.
“Queen’s University and Ulster University were heavily represented in these with 37% of deals and 35% of investment value over this period. This is much larger than the respective average shares at UK level (18% and 23%).”
Source: Written from press release
