Smaller businesses across Northern Ireland raised £76million in equity finance in 2023 as investment levels across the UK returned to pre-pandemic levels.
This is according to the British Business Bank’s annual Small Business Equity Tracker, which also revealed there were 24 deals completed in Northern Ireland last year, a 33 per cent reduction on 2022 with the overall value of deals down by 24 per cent.
Full year data shows that investment declined by 48 per cent to £8.8bn in 2023 across the UK, in line with other equity markets, while the number of deals fell by 25 per cent.
As has been the case in other markets, a tighter macroeconomic environment and heightened interest rates continue both to affect the relative attractiveness of the asset class and hamper exit opportunities for UK companies.
However, equity investment for smaller businesses has remained at over £2bn in each of the last five quarters, demonstrating some stability in the market.
While the equity market has seen two consecutive years of contraction, investment values have increased by 182 per cent over the last 10 years, with deal numbers 42 per cent higher. Since 2014, more than 21K smaller business equity deals have been completed to support the growth of innovative smaller businesses.
The report also reveals that the Belfast VC market has a focus on funding green tech businesses. When looking at the share of European VC investment by city over the past decade, Belfast had a 0.19 per cent share in green tech, just ahead of life sciences at 0.18 per cent, R&D intensive industries at 0.17 per cent and fintech at 0.04 per cent.
Northern Ireland was also one of eight UK regions and devolved nations where the British Business Bank invested a higher proportion of its equity deals compared to the overall market. Between 2021 and 2023, 2.8 per cent of announced equity deals supported by the Bank were in Northern Ireland, compared to 1.2 per cent of deals across the overall equity market and 1.5 per cent of deals across the PE/VC market.
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Meanwhile, the launch of the British Business Bank’s Investment Fund for Northern Ireland is set to bolster the local equity market, providing equity stakes in smaller businesses up to £5m. The other arm of the £70m fund provides debt finance.
Launched in November 2023, the fund has now begun deploying capital with a number of debt and equity deals already completed.
The report also reveals that the UK has overtaken India as the third largest venture capital market in the world, now accounting for six per cent of global investment as UK companies raised £72bn between 2021 and 2023.
The UK has strengthened its international position over the past decade as its share of global VC investment has risen to 5.8 per cent in 2021-2023 from 3.4 per cent in 2014-2016, the largest percentage point increase of any of the top 12 global markets.
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Susan Nightingale, Director, UK Network, Devolved Nations of the British Business Bank, said: “In Northern Ireland it is encouraging to see evidence of sector specialisations especially with net zero, R&D intensive industries and life sciences businesses.
“The £80million raised in equity deals by Northern Ireland firms can help them unlock their potential and help them fulfil their growth plans.
“But there is the potential for many more equity deals in Northern Ireland and more must be done to raise awareness of the benefits of equity investment and how it can help local businesses take the next step.
“We are seeing more deals being completed through the Investment Fund for Northern Ireland and some brilliant local firms which is really encouraging. The fund is another important asset, not only, in providing investment for Northern Ireland businesses, but also helping to raise awareness of how equity investment can sometimes be a better option than debt finance for growing companies.”
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