Business News Round Up (07/11/2022)
Scottish scale up investment cools during summer months
Investments in fast-growth Scottish businesses cooled slightly over the summer as economic challenges and an impending global recession saw investors take a more cautious approach, according to KPMG’s latest Venture Pulse Survey. Scotland’s scale ups attracted £117m of venture capital (VC) investment across 41 deals in the third quarter of 2022 – 40 per cent less than was invested during the same time in 2021, with volumes also down by 28 per cent. While the second half of 2022 looks set to be far quieter, a record breaking £623m has already been invested in the first nine months of this year, almost surpassing the £626.9m total invested in 2021. Compared with Scotland’s steady Q3 performance, VC investment in the UK fell dramatically during the summer with the volume of deals at its lowest since Q3 2016. However, the volume of VC investment into scaleups outside of London outpaced the capital for the first time in eight years during Q3. The lion’s share of Scottish deals in Q3 involved businesses in Edinburgh (18), followed by Glasgow (8), Aberdeen (4) and Stirling (3). Most deals were late-stage VC (19), with nine seed round, seven early-stage VC and six angel investments taking place.
Over 1 in 3 mid-sized North West businesses plan to restructure as cost pressures mount
According to new research from leading business and financial adviser Grant Thornton UK LLP, a combination of inflationary pressures, rising interest rates and high energy costs, and ongoing supply chain issues are all significantly impacting the financial viability of many mid-sized businesses. Grant Thornton’s Business Outlook Tracker*, which surveyed 101 businesses in the North West in October 2022, found that, in the face of these mounting pressures, just under half (48%) of respondents have already restructured their operations, with a further 40% having plans to do so. Many businesses are having to secure additional finance to work through the escalating costs facing the market, with 48% already having secured further funding and 38% planning to do so. Similarly, 41% of businesses have already reviewed headcount with another 39% planning to. The strain on funding has also led to a drop in investment expectations across all areas monitored by the Tracker. The most significant drops compared to the last round in August 2022 were seen in technology (-11pp), employee wellbeing (-3pp) and recruitment (-2pp). But investment looks to be being directed to areas that will have the most impact on reducing costs. Well over three quarters (84%) of respondents have already invested, or are planning to invest, in productivity, efficiency and automation.
Nearly £900 million invested by private capital in Scotland during 2021
A total of £895m was invested into businesses in Scotland by private capital firms in 2021. This amount represents a strong increase on previous years, with £213m and £271m invested in 2020 and 2019 respectively, according to a new report from the British Private Equity and Venture Capital Association (BVCA). This investment is powering small and medium-sized businesses across Scotland, with nine in 10 businesses supported here employing 250 or fewer people. The report used data and case studies gathered from across the BVCA’s membership, finding that of all UK businesses backed by private equity and venture capital in 2021, 7% (88 of 1319) were located in Scotland. Additionally, technology was the most attractive area for investment in 2021, with 65% (57 of 88) businesses operating in this sector. Michael Moore, BVCA director general, said: “Private capital firms are alive to the many remarkable opportunities Scotland has to offer – be it the emerging tech start-ups in cities like Edinburgh and Glasgow, the world-leading research-led businesses growing out of the country’s universities or the already-established companies with scope to flourish at a global scale.” Among the case studies in the report was Edinburgh-based Cyacomb, which uses its technology to sift through harmful online content. Founded in 2016, it is a spin-out from Edinburgh Napier University and has been supported by Par Equity since early 2021.
https://www.insider.co.uk/news/nearly-900-million-invested-private-28409572
UK business confidence falls to lockdown levels as recession looms
UK business confidence fell to its lowest level since the third national COVID lockdown, as firms continue to be spooked by a looming recession. The latest edition of BDO’s business trends report revealed that both business optimism and output declined to the lowest levels since February 2021 in October to 94.63 and 93.10, respectively. Both indices now sit in contractionary territory, below the 95-point mark — regarded as the watershed between growth and decline, an indicator of a recession. The dip in output productivity was driven by a fall across both the services and manufacturing indices for the second month in a row. Continued disruption to global logistics networks and increased input prices pushed manufacturing activity into negative territory, whilst the cost of living crisis impacted consumer demand, driving down services output. Confidence amongst businesses followed a similar downward trajectory as the weaker macroeconomic environment drove a seventh consecutive month of decline for BDO’s Optimism Index.