North West small businesses increase use of external finance despite national slowdown

Equity markets performed particularly well across the North West in 2024, with deal volumes rising by 11.5% to 146, while equivalent values increased by an impressive 46.2% to £654m. This surge comes despite a nationwide slowdown in equity deals, with UK-wide deal volumes falling by 15.1%.

Demand for external finance among North West small businesses shows no signs of slowing down. An estimated 34% of smaller businesses in the region are open to using finance for growth, while only 9% see it as a major obstacle, a two percentage point drop on the previous year.

Research and development (R&D) remains a key focus for small businesses in the North West, with 44% having invested in R&D in 2024. 31% of businesses were also undertaking new-to-market innovations, ensuring the region remains a hub for innovation.

Throughout the last year, the British Business Bank has continued to support many of these businesses to start-up, scale and grow, with 84% of the businesses supported being outside London. In its latest financial year across the North West, the Bank supported 2,900 companies with £700m in funding. This support is expected to generate £1.6bn in additional turnover over the lifetime of the finance while supporting 32,100 existing jobs and creating an estimated 3,000 additional jobs.

Vicky Mears, UK Network Director, North of England and Midlands at the British Business Bank, said:  “Small businesses are crucial to the UK economy, with today’s findings across the North West showing just how resilient our smaller business ecosystem is. It’s particularly encouraging to see such an uptick in equity deals across our region, proving the North West remains a hub of innovation, with a host of world-leading universities and research institutions bringing new technologies and services to market.

“There is clearly still demand from smaller businesses for finance to scale and grow despite mounting economic uncertainty, so it’s important they have access to bespoke, targeted funding. As a Bank, we’re continuing to ensure we serve the entirety of the UK, particularly those areas that have been left behind in the past. With our Start Up Loans programme, Northern Powerhouse Investment Fund II (NPIF II), and incoming clusters across the North, we’re ensuring we’re there for businesses of all sizes.”

The national picture:

External finance use among smaller businesses across the UK saw a slight decline in 2024 (-1 percentage point) to 45%, consistent with a trend of stabilisation since the sharp recovery (10 percentage point increase) in 2023.

The report also shows that the type of finance use remained stable from 2023 to 2024, with small UK-wide declines of 2 percentage points for grants, overdrafts, and credit cards. Credit cards continue to be the most used finance type (15%), followed by overdrafts (11%), and leasing/hire purchase/vehicle finance, which ranked third (10%).

Smaller businesses had more appetite for risk in 2024, with the proportion of ‘Ambitious Risk Takers’ – those smaller businesses that want to grow and are willing to take risks – increasing from 27% in 2023 to 31% in 2024[1]. This was reflected in the Nations and Regions Tracker, which found that smaller businesses’ openness to using external finance to drive growth rose by five percentage points (up to 38% UK-wide).

Despite this, caution still remains. 19% of businesses that were open to considering finance to grow thought it would be difficult to secure it, and overall business sentiment remained muted.

Richard Bearman, Chief Development Officer of British Business Bank, said: “In the face of a challenging economic environment, it is encouraging that use of external finance has remained stable. This year’s Nations and Regions Tracker also indicates that optimism is brewing for small businesses and we hope to see this reflected in their use of external finance in the near future.

“The British Business Bank is pivotal to providing businesses across our regions with access to the finance they need. With the expanded capacity of the Bank under the Modern Industrial Strategy, we are poised to build on our existing work across the nations and regions.”