North East firms leading in ‘investment intensity’

New figures from the venture capital association have shown that the North East is one of the most active regions in the country.

The British Venture Capital Association’s annual investment activity report found that around £410m was invested in the region’s firms by members during 2012.

The number of North East firms receiving funds also increased from 46 in 2010 and 74 in 2011 to 82 last year.

The region also demonstrated the highest level of ‘investment intensity’ despite having the smallest number of VAT registered businesses.

Regional firms received 1.08 investments per 1,000 VAT registered firms, compared to the next highest ratio of 0.46 businesses per 1,000, which was registered in London and the South East.

The highest proportion of investments made went to the regional technology sector, representing £6m of the £16m total invested by BVCA members in the north east last year.

The average investment size fell from £429k in 2011 to £200k last year, representing the increasing availability of capital to firms of all sizes with different investment needs.

Now, Barrie Hensby, chief executive of NEL Fund Managers is encouraging north east firms to maintain the trend for seeking investment capital to create new jobs and achieve their commercial objective.

Mr Hensby, who represents the region on the BVCA’s venture capital committee, said: “It’s extremely encouraging to see increasing numbers of regional businesses making use of the funds that are available to them, and the likelihood is that as positive as these figures are, they probably represent an under-representation of the actual picture as mezzanine investments are not included.

“Mezzanine investments are unsecured loans that share in the profitability of a businesses and are therefore not included in these venture capital numbers, but NEL alone has invested nearly £12m in 63 businesses in the north east using this type of investment since 2010.

“Given the relatively small number of companies in the north east, our level of ‘investment intensity’ is outstandingly high.

“Right across the region, management teams are taking their business plans forward at a far-greater speed than they’d otherwise be able to consider thanks to the impact of outside investment, and are creating new wealth and jobs in the process which benefit the entire regional economy.

“The Finance for Business North East scheme provides tailored investment options for businesses of every size, and we’re already seeing tangible returns from the money that’s being invested since the scheme was launched three years ago, reflecting an excellent performance by these businesses.

“In a climate where securing the capital needed to realise a business’s potential can still be problematic, investigating how this sort of investment can be accessed and used should be high on the To Do List for ambitious north east management teams.”

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