The British Business Bank have found that private debt has become an important means of funding for UK businesses, with £18.4bn of lending ocurring in 2018 and 2019.
The new report has been published with support from British Private Equity and Venture Capital Association (BVCA) and features data from 55 funds managed by 37 UK fund managers, comprising the majority of UK private debt lenders that cater to smaller businesses, and covers 934 individual deals done in 2018 and 2019.
Catherine Lewis La Torre, Chief Executive Officer of the British Business Bank, said: “In a relatively short period of time, private debt has established a position as a viable type of funding for the UK’s smaller businesses at different stages of development. As the focus shifts from stabilisation to economic recovery, supporting business growth will be a fundamental driver of a thriving post-Covid-19 UK economy. Ensuring that businesses can access the funding best suited to their needs will be vitally important in the coming years and private debt has an important role to play.”
What did the report find?
The report has found that 62% of deals during the time scale were growth transactions with an average size of £2.2m, meaning over £1bn of growth finance was provided to UK businesses during that period.
According to the report, access to private debt for regional businesses across the UK was strong, with 82% of deals being made by companies outside of London. There was strong clusters of regional activity in the North West, Yorkshire and The Humber and growth capital transactions were more prevalent outside of London at 69%.
The report also found that the use of private debt was spread widely across a number of sectors in 2018 and 2019. The manufacturing sector represented the largest with deals by volume at 19% with businesses in the administrative & support service activities sector receiving the most private debt capital in terms of deal value at 21%.
Professional, scientific & technical activities businesses also received a higher proportion of overall investment than deals (18% vs. 13%) due to larger than average deal sizes likely relating to the capital-intensive nature of the industry.
Michael Moore, Director General of the BVCA, said: “The BVCA is delighted to have supported the British Business Bank in the preparation of today’s report, a new and important publication that highlights just how useful private debt has become for smaller businesses. It is clear that this source of finance benefits companies across the country and, regardless of region, has established itself as real catalyst for growth. In a time where economic recovery is of utmost important, this is an incredibly positive sign.”