Strong disparities in financing options “leading to a waste of economic potential”
Business Editor Gary McDonald
07 October 2021 01:00
Northern Ireland is the UK region most reliant on major debt products such as overdrafts, loans, leasing and credit cards, a new annual tracker has revealed.
And it says gaps in financing growth in the region, which accounts for just 1% of all UK equity investments, hamper ambitious entrepreneurs and “lead to wasted economic potential.”
But the British Business Bank (BBB), in its first Annual Regions and Nations Monitor, pledged to change that by encouraging more businesses here to consider equity financing from third parties such as business angels, funds. venture capital and crowdfunding platforms.
The BBB, which is the UK government’s economic development bank, said half of Northern Ireland’s businesses were using external funding in 2021, but the economic potential continues to be wasted due to regional disparities in the industry. access to equity financing and private debt.
The bank’s chief executive, Catherine Lewis, said: “The decline in financial flows in Northern Ireland reflects a population of companies operating with less choice.
“These gaps in financing for growth undoubtedly hold back ambitious entrepreneurs and waste economic potential. This is something the British Business Bank is committed to changing.
Some 86% of companies supported by British Business Bank programs are based outside London, with £ 943million invested between 2020 and 2021.
Its core programs currently support £ 81.8million in funding in Northern Ireland, reaching 1,773 small businesses.
The report points out that access to finance for growth is particularly difficult for rural business owners who are more likely to resort to injecting personal funds into their businesses, especially in the construction sector.
It found that 38 percent of rural construction business owners used personal funds, compared to 27 percent of their urban counterparts.
Agriculture, forestry or fishing make up 41 percent of rural businesses in Northern Ireland, with 58 percent of all businesses registered here in rural areas.
Mark Sterritt, director of the bank’s UK network in Northern Ireland, said: “Third-party equity financing is considerably rarer than core debt products here.
“But despite its relative scarcity, equity financing makes a disproportionate contribution to the economy by supporting companies with the potential for rapid growth.
“Companies looking to expand or even create new markets as well as those looking to fuel rapid growth may not be able to obtain debt financing due to their risk profile, lack of collateral. or variable cash flow.
“For these companies, equity investments that do not come with regular repayments can create a path to realize their growth plans.”