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13th June 2022

Business Matters: Role of finance in unlocking regional growth

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Northern Powerhouse Investment Fund

Sean Hutchinson, Senior Investment Manager at the British Business Bank, discusses the progress the Northern Powerhouse Investment Fund  has made in strengthening the regional economy in the five years since its launch, across its three financing options: Debt, Equity and Microfinance.

Launched in 2017, the Northern Powerhouse Investment Fund  forms a key part of the Bank’s activities to back the Government’s Levelling Up agenda by helping to reduce funding imbalances and create economic prosperity in the North of England.

Over the past five years, NPIF has made real strides in driving strong economic activity across the North. So far, it has delivered 1,364 investments to 1,010 businesses across the North West, Yorkshire & the Humber and Tees Valley, across 10 Combined Authority and Local Enterprise Partnership (LEP) areas. In total, £326m has been invested directly by the Fund, whilst an additional £488m has been raised in private sector co-investment.

Finance is delivered through NPIF’s network of dedicated fund managers, that work to deliver its three types of funds – Microfinance, Debt and Equity Finance. Each fund is designed for businesses at different stages in their growth journey and are available for a range of purposes.

Microfinance provides small business loans from £25,000 to £100,000 and is typically used by companies looking to fund development projects or fill funding gaps for growth. Liverpool-based plastic free packaging distribution company, Green Bell Packaging, secured a £100,000 microfinance investment from NPIF – BFS & MSIF Microfinance in May 2022, and is a prime example of this in action.

Green Bell developed the first plant-based mailing bag to the UK market and has since gone onto develop a range of plant based, biodegradable and compostable packaging products. It is utilising investment to further develop its product range, in order to bolster sales with high street retailers and wholesalers. More than £20m has been delivered through NPIF’s microfinance funds in the last five years.

Debt finance is a similar finance option, but the funds available are larger, ranging from £100,000 to £750,000. It is a powerful tool for accelerating businesses to the next level, with funding generally used for hiring staff, purchasing machinery, moving premises or even as working capital to finance a big order.

London Lash Pro is an online wholesaler of eyelashes and associated goods based in Bolton that has utilised debt finance effectively. It secured a £300,000 loan from NPIF – FW Capital Debt Finance in 2020, during a challenging time for the beauty sector, as the pandemic forced closure of salons globally.

Thanks to investment, the business has been able to develop its international growth plans, overcome operational challenges during the pandemic and accelerate its path to hitting a £12m turnover by 2023. It is one of 542 businesses that have received loans from the NPIF debt finance funds, with a total investment of £174m deployed directly by the fund to date.

Equity finance is an important ingredient for innovative businesses that are looking to grow at a rate that cannot be supported through borrowing, with investments up to £2m. It can be utilised at any stage of a company’s growth cycle from start up to scale up.

Sheffield-based IT services provider Azzure is a shining example of a business that has undergone exceptional growth through the equity finance fund. It secured a £2m investment from NPIF – Mercia Equity Finance in 2018 to enhance growth. Since then, Azzure has more than doubled its profits and achieved its best ever year in 2021. It was later acquired by Content+Cloud, the UK arm of Nordic IT services group Advania, after growing to a 58-headcount. Since its launch, NPIF has supported 136 businesses with equity finance, representing £131m of the Fund’s investment.

The Northern Powerhouse Investment Fund’s  suite of investment options continue to support companies of all sizes, sector, and growth trajectory. Over the last five years, it has been a key enabler of business growth across the North of England. It has facilitated creation of new job opportunities, attracted greater private-sector investment, and helped to build businesses of the future.

The Northern Powerhouse Investment Fund project is supported financially by the European Union using funding from the European Regional Development Fund (ERDF) as part of the European Structural and Investment Funds Growth Programme 2014-2020 and the European Investment Bank.