Equity investment in Scotland’s smaller businesses surged in 2024, rebounding from a challenging previous year, according to fresh research from the British Business Bank. The Small Business Finance Markets 2024/25 report revealed a 14.2% rise in investment value for the first three quarters of 2024, reaching £407 million.
That increase more than doubled the UK-wide growth rate of 6.6%, positioning Scotland to record its third-highest annual figure for equity investment in the last decade. Only the exceptional years of 2021 and 2022, when deals reached £417 million and £562 million respectively, saw greater figures.
Deal Numbers Remain Strong Despite Drop
While the number of transactions declined slightly by 1.5% to 135, Scotland still performed well compared to the rest of the UK. It recorded the second-best year-on-year change among UK nations and regions, significantly outperforming the UK average decline of 24.3%. Only the North East of England saw an increase, rising by 2.4%.
Scotland also overtook the South East to claim the second-highest deal volume outside of London, reinforcing its reputation as a key hub for small business investment.
External Finance Usage Declines, But Remains Above Recent Averages
Smaller businesses’ reliance on external finance fell by 18 percentage points in the first half of 2024, dropping to 41%. However, this remained the second-highest H1 rate in recent years, suggesting a return to more stable financing levels after a turbulent economic period.
Despite the decline, business owners continue to seek funding opportunities that align with their growth ambitions, navigating economic fluctuations with strategic financial planning.
The Role of the British Business Bank’s Investment Fund
To support businesses across the country, the British Business Bank launched its £150 million Investment Fund for Scotland in late 2023. The fund aims to enhance access to finance across Scotland, ensuring small firms receive the backing they need.
In its first year, the fund committed over £10 million to various Scottish businesses. Notable recipients include:
- Wilsons Pet Food
- Biotech firm Ingenza
- Sky-Pin Drones
The fund has provided loans ranging from £25,000 to £2 million, as well as equity investments of up to £5 million.
Optimism for 2025 and Beyond
Susan Nightingale, Director of the UK Network for Devolved Nations at the British Business Bank, expressed confidence in Scotland’s business landscape. She noted that the findings highlight the resilience of Scotland’s small business community and its financial ecosystem.
“With interest rates trending downward, financing conditions are improving, creating a more supportive environment for investment in 2025,” Nightingale stated.
She also emphasized the importance of continued business investment to drive economic growth, increase wages, and enhance living standards.
“In its first 12 months, the Investment Fund for Scotland has already provided ambitious business owners with the support they need to realize their growth plans. With over £10 million committed, we aim to build on this momentum and reach even more firms, regardless of their location or sector.”
The positive trajectory in Scotland’s small business investment landscape signals a growing confidence among entrepreneurs and investors alike, setting a promising stage for the years ahead.
