New report from British Business Bank reveals more than £18bn of private debt lending to the UK’s businesses, demonstrating its vital role in supporting growth
- New report finds £18.4bn of private debt lending in 2018 and 2019, offering an increasingly important means of funding for UK businesses of all sizes
- 82% of private debt deals in 2018 and 2019 occurred outside London
- Over £1bn of growth finance through 563 deals was provided to UK firms seeking to scale up in 2018 and 2019
- Private debt may be suitable for UK businesses recovering from the Covid-19 downturn
A new report by the British Business Bank reveals how private debt has become a valuable source of finance for smaller businesses across the UK since the 2008 economic crisis – with £18.4bn of lending in 2018 and 2019. Private debt is often the only or most viable funding solution for smaller businesses and mid-cap firms with bespoke requirements and a need for greater flexibility in terms of financing structure.
Published with support from the British Private Equity and Venture Capital Association (BVCA), the UK Private Debt Research Report is the first time primary data collection and analysis has been reported for this section of the UK small business finance market. The report 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.
The report found 62% of deals (563) during the period were growth transactions, with an average deal size of £2.2m, meaning that over £1bn of growth finance was provided to UK firms seeking to scale up during the period. The use of growth deals at the smaller end of the market indicates demand for private debt is unlikely to decrease, and may prove to be a particularly suitable for companies coming out of the Covid-19 downturn with a growing need for investment.
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.”
Regional access to private debt
Reducing regional imbalances in access to finance for smaller businesses is a key objective of the British Business Bank, and data from the report shows access to private debt for regional businesses across the UK in 2018 and 2019 was strong:
- Four in five deals (82%) and 65% (£5.9bn) of private debt investment value was into companies outside of London
- Strong regional clusters of private debt activity especially in the North West and Yorkshire and The Humber, with more private debt deals occurring in the North West than any other region
- Growth capital transactions are more prevalent outside of London, where 69% (of all deals completed outside of London were classified as growth, compared to 39% (59 deals) in London
Sectoral focus of private debt
The report shows that use of private debt was spread widely across a variety of sectors in 2018 and 2019. Businesses in the manufacturing sector represent the largest number of deals by volume (19%), followed by businesses in the information and communication (16%), and professional, scientific & technical activities (13%) sectors. Businesses in the administrative & support service activities sector received the most private debt capital in terms of deal value (21%), with a higher proportion of capital than deals due to larger than average deal sizes. 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.”
Under one of its strategic objectives to increase the diversity of funding available to smaller businesses the British Business Bank’s programmes have supported this asset class since 2012. Primarily through British Business Investments, one of its commercial subsidiaries, it has made 25 commitments to private debt funds totalling £1.5bn of finance, which has to date supported £850m of investments in over 250 businesses.
 Proportions apply to the population deals for which geographical information was available
 Proportions apply to the population of deals for which sectoral information for the activity of the underlying recipient business was available.
Notes to Editors
About the British Business Bank
The British Business Bank is the UK government’s economic development bank. Established in November 2014, its mission is to make finance markets for smaller businesses work more effectively, enabling those businesses to prosper, grow and build UK economic activity. Its remit is to design, deliver and efficiently manage UK-wide smaller business access to finance programmes for the UK government.
The British Business Bank’s core programmes support nearly £8bn of finance to almost 94,800 smaller businesses. Since March 2020, the British Business Bank has also launched four new Coronavirus business loan schemes, delivering more than £72bn of finance to over 1.5m businesses.
As well as increasing both supply and diversity of finance for UK smaller businesses through its programmes, the Bank works to raise awareness of the finance options available to smaller businesses. The British Business Bank Finance Hub provides independent and impartial information to businesses about their finance options, featuring short films, expert guides, checklists and articles from finance providers to help make their application a success. In light of the coronavirus pandemic and EU Exit, the Finance Hub has expanded and it now targets a wider business audience. It continues to provide information and support for scale-up, high growth and potential high growth businesses, but now provides increased content, information and products for businesses in survival and recovery mindsets. The Finance Hub has been redesigned and repositioned to reflect this, during this period of economic uncertainty.
British Business Bank plc is a public limited company registered in England and Wales, registration number 08616013, registered office at Steel City House, West Street, Sheffield, S1 2GQ. It is a development bank wholly owned by HM Government. British Business Bank plc and its subsidiaries are not banking institutions and do not operate as such. They are not authorised or regulated by the Prudential Regulation Authority (PRA) or the Financial Conduct Authority (FCA). A complete legal structure chart for the group can be found at www.british-business-bank.co.uk
 Figures as at end of June 2020
 Figures as at 28 January 2021