Investors are failing to take advantage of investment opportunities outside of major cities, a new study has revealed.
The research, published by the British Business Bank (BBB), shows significant regional disparities in access to finance.
According to the report, over four in 10 UK firms have used external finance in 2021 to grow or support their business in the wake of the coronavirus pandemic.
But firms based in London, the South East, the North West, and the East of England accounted for 86 per cent of equity investment and 69 per cent of private debt investment, despite representing just 55 per cent of UK businesses.
In comparison, firms in Yorkshire and the Humber – representing 7.2 per cent of businesses – accounted for just 1.5 per cent of equity investment and 4.9 per cent of private debt investment.
The study reveals that distance, rather than opportunity, is holding back investment in rural businesses. For example, it was found that investors are “far more likely” to support businesses close to their office, with 82 per cent of equity investment deals involving firms within two hours of each other, while 61 per cent of deals involved firms within one hour of each other.
It means that high-potential rural firms are often left with no other option than to use personal funds and loans to finance business operations – resulting in less growth compared to city-based peers.
Commenting on the research, Catherine Lewis La Torre, CEO of British Business Bank, said the lack of finance options are “undoubtedly” holding back rural businesses.
“The lower flows of finance in certain regions and localities reflect a population of businesses operating with fewer choices,” she said.
“These gaps in growth finance are undoubtedly holding back ambitious entrepreneurs and lead to wasted economic potential. This is something the British Business Bank is committed to changing.”
Click here to access the Regions and Nations Tracker 2021.
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