The British Business Bank’s second annual Nations and Region Tracker, published today, finds usage of external finance has fallen overall across the UK as nine out of the twelve regions saw a drop in use of small business finance.
Four in 10 (40%) businesses across the UK were using external finance in the four quarters to Q2 2022 compared to 42% a year earlier, with the East Midlands slightly below at 36%, substantially lower than the 47% usage a year prior. Core debt products remain the most used and widely available across the region.
Businesses in the East Midlands secured 50 deals worth £154m of equity investment in 2021. The value of equity deals increased by 92% compared to 2020, with the number of deals up 32%.
The Nations and Regions Tracker found that businesses in the most deprived areas of the UK are more open to using finance and report higher levels of ambition for growth, whilst facing greater challenges in accessing external finance.
Nearly half (49%) of businesses in the most deprived areas have a long-term ambition to be a significantly larger business, compared to 40% elsewhere. They are also more willing to use external finance to grow (36%) than businesses in less deprived areas (33%).
However, the report found that the growth ambitions of smaller businesses in the UK’s most deprived areas are being stifled because of a lack of access to finance. Just over nine per cent of firms in the East Midlands are based in the most deprived areas of England and Wales, making them more likely to face barriers to growth.
A quarter (26%) of smaller businesses in need of finance in deprived locations did not apply. Of those who did apply between 2020-21, 16% were turned down compared to just 11% elsewhere.
Dr Sophie Dale-Black, UK Network Director, Midlands at the British Business Bank, said: For a sustainable and prosperous economy in our region to continue to grow, we want to break down particular barriers to finance so that access to finance is a level playing field for all entrepreneurs – wherever they are, whatever their gender, whatever their ethnicity.
“We know external finance is an important tool for smaller businesses to promote growth and stability. The decline in external finance usage brings to life the various economic challenges smaller businesses are facing. It is therefore important that they know what finance options are available which we are committed to help them do.”
