‘Bank should now establish equity fund for Wales’
THE British Business Bank should establish an equity fund specifically for Wales, says Economy Minister Vaughan Gething.
New research from the economic development bank of the UK Government shows a correlation between where investors are based and a higher propensity to invest equity into firm within a two-hour travel time.
While Wales has around 5% of the UK business population, in terms of the value of equity deals it secures less than 1%, according to the bank’s Regions and Nations Tracker: Small Finance Markets report. On number of deals Wales is at 4% of the UK level.
While the British Bank Business provides finance to firms across the UK, including its successful Start-up Loans scheme, is has specific geographical equity funds including for the south-west of England, the Midlands and the Northern Powerhouse - but not for Wales.
Mr Gething said as well as an equity fund from the British Business Bank to back Welsh firms he would like to see more private equity and venture funds being active in the Welsh marketplace. The Welsh Government’s wholly-owned investment bank the Development Bank of Wales can make equity investments into Welsh SMEs up to £5m per round.
Rather than being seen as competitive, the development bank could invest alongside the British Business Bank and other funds, which it currently does, to increase levels of growth capital into established firms seeking to expand and start-ups looking to scale-up.
The minister said: “I know that businesses in Wales don’t have the same level of interest in terms of investment choices (from funders), despite the fact this isn’t borne out in the strong performance of Welsh firms. So, I think there is an opportunity and a need to see how we influence more people (investors)
“The development bank is looking more at equity stakes and I think that is a positive. And it is better we also get the rest of the UK to look at what we are doing and the success story that is happening here and moving the dial away from just having established centres like the south-east for equity investment.
“We can do better and as an Economy Minister I think it is important to say we want more equity investment into businesses in Wales as it is often an important part of them being able to scale-up and grow.
“It is a conversation I would want to have on how we can access that equitably as this is an opportunity on top of what we have already and not instead of. So, if it is okay to have an equity fund investing in the southeast of England, I don’t think you could make a logical case that there shouldn’t be that investment in Wales too. If you look at our economic performance relative to regions in England there is great need and value in doing that as well.
“So, I would like the British Business Bank to consider a specific equity fund for Wales so they support those equity choices (for Welsh firm) here.”
Speaking earlier this month the Rhondda-born chief executive of the British Business Bank, Catherine Lewis La Torre, said the bank would reflect on the case for a specific fund for Wales following its research which highlighted that London, the south-east, the north-west and the east of England accounted for 86% of equity investment and 69% of private debt investment despite having just 55% of UK businesses.
Ms Lewis La Torre said: “There are large discrepancies in access to equity finance across the UK and what the data shows us is four regions accounting for 55% of businesses [UK population] soak up 86% of equity investment.
“So, that means there are companies located in regions and nations outside of these four big areas that aren’t getting the equity finance that they need. 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.”