BBB AR 2020 Banner image Regional Imbalance

Our objectives

Reduce regional imbalances

To identify and help to reduce regional imbalances in access to finance for smaller businesses across the UK.

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The challenge for smaller businesses, and why it matters

Appropriate finance should be available to smaller businesses wherever they’re based, but local and regional imbalances persist across the UK.

The availability and ease of accessing certain types of finance for smaller businesses depends significantly on locality, with differences in awareness and the availability of alternative finance options, particularly those suited to innovative, scale-up businesses.

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This can affect the ability of smaller businesses located outside of well-established financial hubs to achieve their potential.

We recognise the importance of well-developed entrepreneurial ecosystems, and interaction between public and private intermediaries, in enhancing the development of local finance markets and reducing regional imbalances. If smaller business finance markets work well across the UK, local economies are more likely to develop at pace and scale, more evenly spreading the benefits of economic development.

Background and recent trends

Regional debt markets are working reasonably well, with volumes of debt finance continuing to be relatively closely aligned with the general geographical distribution of the business population. This reflects high levels of awareness for core bank products like overdrafts, loans and credit cards, alongside relatively high confidence in assessing and applying for debt products. Specific local market failures persist, however, in some areas.

Equity finance, on the other hand, continues to be concentrated in London, with 48% of deals and 66% of investment in UK SMEs taking place in London in 2019 – well above its 19% share of smaller businesses and 20% share of high-growth businesses. While this concentration in London is a long-standing feature, in recent years the concentration of equity deals by number – although not by value – has declined a little, possibly reflecting the increase in VC funds with offices outside London.

There have also been signs of equity clusters developing outside of London, with Manchester, Edinburgh and Glasgow sitting alongside seven London boroughs in the top 10 of Local Authority Districts by number of announced equity deals in 2019.

Evidence suggests a reinforcing effect in the distribution of equity. Venture capital investors are concentrated in London and the South East, and 46% of businesses outside these regions identify a lack of suitable investors in their local area as a barrier to using equity. This compares to just 30% in London and the South East. Smaller businesses outside London and the South East are also more likely to perceive difficulties in putting together a business case. These perceived barriers to using equity could account for disparities in equity use – and highlight the importance of addressing both demand and supply side issues in the UK’s regions and nations.

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Responding to the challenges, and 2019/20 snapshot

We consider regional imbalances in terms of demand, supply and the type of finance available.

In designing and delivering programmes, we have tended – in line with market trends – to focus on equity in addressing regional imbalances. We do, however, include debt provision as part of our regional programmes where local market conditions require it. This reflects our ambition to support greater volume and diversity of finance in specific areas – particularly outside of London and the South East.

We have worked with local partners to launch three regional funds which include debt as well as equity, in response to regional access to finance disparities:

  • Northern Powerhouse Investment Fund (NPIF, launched 2017, £400m)
  • Midlands Engine Investment Fund (MEIF, 2018, £250m)
  • Cornwall and Isles of Scilly Investment Fund
    (CIOSIF, 2018, £40m).

Another £30m fund, focusing on debt, was launched in 2018 exclusively for businesses in Northern Ireland.

These relatively recently launched funds have already reached significant milestones, with NPIF and MEIF delivering, along with private sector investment, £330m and £100m of funding respectively to local businesses, as at end of March 2020. In July 2019, an independent ‘early assessment’ evaluation of NPIF found that “NPIF is only two years into a 10-year programme, but to date it has been very successful. The number and value of lending and equity deals are ahead of target and the finance has been distributed widely across the NPIF area.” 1

The Bank’s response to the regional equity challenge has focused on building the vital ‘grassroots’ components of an equity ecosystem, particularly at smaller investment sizes, and for businesses at an early stage. These aims are reflected in the Bank’s 2018 £100m Regional Angels Programme, which seeks to develop clusters of angels – who not only provide capital but typically also business experience and expertise – outside of London and the South East. In September 2019, the Bank made its first £10m commitment under the programme to Dow Schofield Watts Angels.

Our response to the demand issues encountered in the regions is described in the next strategic objective.

BBB AR 2020 Case study Images Seeweedco
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Case study
Seaweed & Co.

  • Region: North East
  • Location: North Shields
  • Programme: Start Up Loans
BBB Case study map North east

Craig Rose, a marine biologist, had always been fascinated by the sea and wanted to share his passion by creating a business that was environmentally, commercially and socially sustainable.

Based in North Shields, Seaweed & Co. supplies food and nutrition manufacturers with a range of seaweed products sourced exclusively from the Outer Hebrides. Seaweed & Co’s products are sold to global distributors that work with major multinational companies.

2019/20 KPI performance

Our KPI for this objective is focused on achieving key strategic milestones to drive delivery of our varied supply and demand activities. We assess this using a ‘Red Amber Green’ status, where Green indicates met, Amber indicates partially met and Red indicates not met. At year-end, our Board and Shareholder examine an internal report on regional activities and agree an assessment of performance.

In achieving Green for this KPI in 2019/20, we continue to accelerate and expand our work in addressing regional imbalances in finance markets across the UK.


Report describing the Bank’s regional activities, and the execution of two strategic milestones:

  • Identification of regional access to finance issues by July 2019
  • Five-year regional strategy for addressing prioritised issues by December 2019



Interim Covid-19 update on Bank activities

Initial evidence shows that imbalances in smaller business access to finance (and indeed wider economic imbalances) evident in the UK before the Covid-19 crisis will persist or worsen as a result of the pandemic.

This means that our regional programmes are even more relevant, and we have been working with all relevant stakeholders to respond:

  • Our regional funds have been responding rapidly, to deploy funding to new and existing local businesses. We’ve worked with the organisations which fund them, and our regional partners, to support implementation of this approach, which has also included capital repayment holidays and usage of CBILS and the Future Fund. To put this activity into context, deployment for Microfinance and Small Business Loans in the Regional Funds was three times greater in Quarter 1 2020/21 at £5.04m, compared to £1.54m in Quarter 4 of 2019/20.
  • We increased our Regional Angels Programme’s amount of capital for deployment for 2020/21 from £17.5m-£25m to £50m. This additional funding, from existing programme headroom, increases the pool of early stage equity capital available for investment in high potential businesses across the UK.
  • Alongside this, we continue to appoint new delivery partners to the Regional Angels Programme, with £15m committed to Par Equity and £10m committed to Startup Funding Club in April 2020.

End notes

1 SQW Ltd., Northern Powerhouse Investment Fund – Early Assessment Report 2019,

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