The third quarter of 2017 saw the UK’s equity investment market finally bounce back after a few underwhelming quarters.
The latest research from Beauhurst, an investment tracking platform, shows that Q3 had the most equity deals in a quarter since the company began its tracking in 2011. The amount invested also nearly scaled to the bullish heights of early 2016.
“I think UK investors are hunting for yield (we'll see how the promise of gradual interest rates affects that) and foreign investors are bargain-hunting,” said Pedro Madeira, Beauhurst’s head of research.
Growth stage businesses, in particular, benefitted from the increased deal numbers. There was a 45% rise in investment into British scale ups. The support, Madeira said, consisted of “follow-on investment from existing investors”.
It's “a very positive sign that the UK can support the growth of startups beyond the early stage
According to Beauhurst’s report, it's “a very positive sign that the UK can support the growth of startups beyond the early stage”. It’s a long held view that the UK investment scene did not have the capital required to support scale ups. Beauhurst’s data suggests this could be coming to a close.
These results will please the government after a recent Treasury report painted a troubling picture for scale-up finance. Its findings suggested that UK businesses found the transition between SEIS and EIS and scale-up finance particularly difficult. But Beauhurst’s research would suggest a sea-change.
London took the majority of overall deals (49.37%), but Madeira told AccountingWEB this fact should be tempered by positive developments elsewhere in the UK. “The overall increase is due to substantial increases in the North West, Scotland, Yorkshire and Humberside and the South East,” he said.
Those regions saw increases of 10-11 deals each. London still took the lion's share overall, of course, but the spread was more even in Q3 than Q2, which is a good sign.” The East of England saw the biggest decrease (shrinking from 27 deals to 18).
Q3’s bumper harvest was boosted further by a record number of mega rounds. That is investments over £50m. These investors, however, are different from those investing in the lower brackets, usually large companies like Aviva, KKR, T. Rowe Price. Madeira adds, “The mega-deals had heavy foreign participation”.
About Francois Badenhorst
I'm AccountingWEB's business editor. Feel free to get in touch with comments, tips, scoops or irreverent banter.