News

9th May 2023

Business Matters: Investment and collaboration – the ingredients for Northern success

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Northern Powerhouse Investment Fund

Keira Shepperson, Director of Regional Funds at the British Business Bank explores the bubbling potential of the Northern business landscape and discusses its role as a central pillar of the national financial ecosystem.

The North has been building its position as a key player within the UK’s financial services ecosystem for many years. The centres of Manchester, Leeds and Liverpool have provided a breeding ground for investment firms targeting businesses on their doorstep, and the Northern Powerhouse Investment Fund (NPIF) fund managers have provided access to finance through Microfinance, Debt Finance, and Equity finance options to companies in towns and communities across the whole of the region.

These developments offer something to be upbeat about. It’s not only an indicator of a fertile business environment to access finance, but it drives forward healthy competition amongst northern investors. Developments like this are crucial to the success of a region, and it paves the way to give businesses more choice when it comes to growth.

In the British Business Bank’s 2022 Small Business Equity Tracker, the figures for Northern equity deals took a step in the right direction. The North West led the charge with a notable jump of 213% with the value of transactions reaching £872m in 2021. During that same period, the value of North East equity deals increased 58%, and Yorkshire and the Humber moved the dial by 13%.

Although the distribution of lending needs to strike more of a balance across regions, much of this activity has been spurred on by the diversity of funders in the North. The Northern Powerhouse Investment Fund (NPIF) in particular has made great strides – investing £393m into 1,164 northern businesses.

Overcoming geographical barriers

Whilst all the evidence points to a more level playing field when it comes to accessing finance – there are still some significant barriers for the Northern business community to collectively overcome.

The first is geographical distance. And it really does matter. The British Business Bank’s 2021 Regions and Nations Tracker highlighted significant proximity issues when it comes to accessing finance. A study, which looked at 14,500 equity investments, revealed that in 82% of cases investors had an office within a two-hour travel time of the company they’re backing.

It shouldn’t matter whether you’re in Middlesbrough or Manchester – business opportunities shouldn’t be limited just because they’re not based in the big cities. If businesses are performing well, they must have access to the same opportunities at hand in the cities for boosting growth.

Through its fund managers, NPIF is providing access to finance beyond the main Northern hubs of Manchester, Leeds, and Liverpool. It’s through a region-wide approach that the business community can take the first steps to greater equality in access to finance across the geographies of the UK.

Bringing greater gender diversity

It’s clear more needs to be done to support female-led businesses too. According to The Alison Rose Review, only 1% of UK venture capital goes to businesses with female founders.  Despite the efforts of female-focused investment groups like the 6% Club and Fund Her North, that NPIF fund managers such as GC Business Finance, Maven Capital Partners, and Mercia Asset Management are a part of, there is still much progress to be made in providing access to finance for women.

Looking at NPIF’s own portfolio, our interim evaluation report found that for investee businesses to-date 71% had women in their senior management team. However, we know that more needs to be done to encourage diversity in the business community.

NPIF has been proactively working to address this challenge, as all our fund managers are signatories of the Investing in Women Code – a commitment by financial services firms to improve female entrepreneurs’ access to tools, resource and finance from the financial services sector. NPIF’s WomanMade campaign also brought together women in business from female leaders to investors, and women-owned SMEs to encourage conversation around the key barriers in the modern business environment. Whilst much has been done to identify the challenges women face, tangible steps must be taken to support and champion women in business.

This year, the Alison Rose review found that all-female-led companies represented 20% of all UK businesses, a 2% increase from 2018. This progress is commendable, but it is by no means the end. More needs to be done to bring greater gender diversity in business, and this priority remains at the forefront of NPIF’s ambitions to provide the support and access for female entrepreneurs.

While there’s lots to be proud of in the region, what we’re seeing is the tip of the iceberg in terms of potential. With a focus on investment, and better collaboration with our stakeholders – we’ll be able to get around these issues and solve them together. Working towards this goal will mean a stronger North is on the horizon, and with £660m of government funding for the second Northern Powerhouse Investment Fund,  the British Business Bank is at the forefront of providing support and opportunities for the business community in the North.

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.

Editors Notes