Business News Round Up (17/08/2023)
Scottish businesses highlight triple threat of interest rates, low investment and high costs
Almost half of Scottish businesses believe that the Bank of England should resist raising interest rates any further as they continue to battle challenging economic conditions for trading, according to the latest Addleshaw Goddard Scottish Business Monitor (SBM) report. The findings come as business sentiment drops slightly from a relatively high in the Spring report, with most businesses experiencing a contraction in sales, turnover, investment, and export activity in Q2 of this year – only employment figures increased on Q1. Produced in partnership with the University of Strathclyde’s Fraser of Allander Institute, the report on the second quarter of 2023 surveyed 400 firms from across the economy in July and August. One of the starkest findings of the Q2 SBM is that around 40% of surveyed firms reported cancelling or delaying investments – primarily physical assets – over the past year. The most common reasons for these cancellations and delays have been economic uncertainty, affordability, and the cost of borrowing. Half of the firms that have cancelled/delayed investments are either unsure when they plan on making these investments or are planning them for 2025 onwards. Coming on the heels of the findings of the report on 25 years of the SBM, published in March this year, which found that low levels of investment have been a longstanding feature of the Scottish economy for many years, the performance of capital investment is a major concern.
North West deal values pass £11bn in H1 2023
The value of deals in the North West soared to the third largest total for the last decade in the first half of 2023, a new report has found, despite the volume of transactions dropping. Experian Market IQ’s M&A Review for the period shows that the number of deals dipped by about 30 per cent, while value surged to more than £11bn. Values increased across small, large, and mega transactions, and the top deal during the period was Freya Bidco’s £4.46bn takeover of Northwich-based Dechra Pharmaceuticals. Overall, mega deals generated almost £8bn towards the total value of M&A transactions in the region. In line with the total deal market, acquisitions still remain the most popular type of transaction, despite a fall in volume of 34 per cent. Development capital deals dopped significantly in the first half, compared to H1 2022, although investor buy-outs climbed, along with secondary buy-outs. Combined, IBOs and secondaries were up by 14 per cent in volume year on year, while employee buy-outs remained consistent, with management buy-outs falling by a quarter. There was a North West element in about 12 per cent of all UK transactions by volume so far this year, with firms in the region contributing approximately £16 per cent of total deal value.
https://www.insidermedia.com/news/north-west/north-west-deal-values-pass-11bn-in-h1-2023
Venture capital investment dips across Scotland
The volume of venture capital (VC) invested into Scotland’s start-ups has dropped significantly in the second quarter of 2023, as the deals market continues to experience a slowdown. KPMG’s latest Venture Pulse report showed that during the second quarter of the year, 28 deals totalling £63m took place, marking an 80% drop compared with the same period last year, when £325m was invested across 45 deals. The total for the first half of 2023 now stands at £133m – significantly down on H1 totals for 2021 (£332m) and 2022 (£506m), when the market was extraordinarily busy following the pandemic. Standout deals in Scotland during the quarter include Manus Neurodynamica, which develops technologies for neuromotor assessment. The company closed a £2.6m funding round to support the commercialisation of its NeuroMotor Pen – a device to aid diagnosis and monitoring of neuromotor disorders like Parkinson’s disease. The quarter’s largest VC investment went to Glasgow-based Chemify which secured £16m in later stage funding to develop its technology to make complex molecules on demand.
https://www.insider.co.uk/news/venture-capital-investment-dips-across-30722804
Investment Zones on the cards for four in five Scottish businesses – BDO
Four in five mid-sized Scottish businesses would consider relocating part of their organisation to one of the proposed Investment Zones to benefit from the available tax reliefs, according to BDO. The accountancy and business advisory firm’s bi-monthly Economic Economy surveyof 500 mid-market businesses found that 84% of Scottish businesses surveyed either had considered moving or would consider it in future. The two UK Investment Zones in Scotland will be located in Glasgow City Region and the North East of Scotland – the first time the Investment Zones model has expanded outside of England. Two Scottish Regional Economic Partnerships will be established, each receiving over £80 million in targeted investment, tax relief and other incentives over five years. According to the most recent BDO Economic Engine survey, 38% of Scottish businesses cited the biggest challenge they face for the remainder of 2023 as a decline in demand with customers purchasing fewer products or services due to rising costs. Supply chain issues was also named as the biggest challenge for 38% of mid-sized businesses.