Equity investment in small businesses across the East Midlands grew by 25.5% between Q1 and Q3 2024, despite a 14.9% drop in deals compared to the same period in 2023, according to the British Business Bank’s Small Business Finance Markets report 2024/25. Nationally, half of the UK’s nations and regions saw growth in equity deal value despite challenging economic conditions.
The proportion of small businesses using external finance fell from 50% in Q3 2023 to 43% in Q2 2024. Limited capital and higher borrowing costs due to investor uncertainty remain key barriers to investment. Smaller businesses invested an estimated £12.3 billion in 2024, while larger businesses invested £27.7 billion—2.25 times more—despite contributing a smaller share of total economic turnover.
The report follows the first anniversary of the Midlands Engine Investment Fund II, which has facilitated over £37 million in investments and completed its 100th deal. The fund provides commercial finance, including loans from £25,000 to £100,000, debt financing up to £2 million, and equity investments of up to £5 million.
Challenger and specialist banks continued to gain market share, providing £37.3 billion of the £62.1 billion in gross lending to small businesses in 2024. Their share of gross lending reached 60%, surpassing the UK’s five largest banks for the fourth consecutive year.
