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Venture capital and private equity helping to drive North East economic recovery

After coming through one of the worst recessions in living memory, the UK economy seems to be back on track again.

The economy grew 0.8% in the first three months of this year, which makes the UK one of the better-performing countries in the EU.

Meanwhile, research by PwC showed that deal volumes across the country are on the rise, due in part to an increase in the number of small and mid-market transactions. Business confidence seems to be higher than at any time over the past five years, with 70% of respondents to the PwC survey predicting that deal volumes will increase again throughout this year.

These positive trends are being replicated in the North East. In the first four months of this year, several debt and equity deals struck as a result of the Finance for Business North East (FFBNE) programme are fuelling business growth across a wide range of sectors.

The Original Sofa Company in Team Valley secured a £100,000 investment from the FFBNE Growth Fund to create a new sales channel in London. Meanwhile, Wilton-based CatalySystems, which helps the process industries to conserve, clean and re-use waste water, received £666,000 from the Technology Fund to expand its in-house resources and strengthen its presence in overseas markets.

In total FFBNE has provided £93m of debt and equity funding to around 600 SMEs since 2010, creating or safeguarding more than 3,000 jobs. In addition, the programme has helped to secure more than £115m of private sector cash to support deals from venture capital firms, business angels and other investors taking the overall investment figure over the £200m mark. Beneficiaries include fledgling start-ups and high-growth, medium-sized firms operating in a wide variety of sectors, such as technology, manufacturing, IT and renewable energy.

Investment programmes such as this are designed to boost the growth of local companies, which in turn helps to strengthen the North East economy. Just a few years ago, companies were conserving cash and scaling back their investment plans. Borrowing was not on the agenda, with affordable finance hard to come by on the high street.

However, as economic conditions eased, more businesses turned to venture capital and private equity as a means of securing funds that would act as a catalyst for expansion. Suddenly, instead of talking about job losses, plant closures and business failures, company directors have put growth back on the agenda again.

Of course, not everything in the garden is rosy, with persistently high unemployment and some businesses still struggling to get affordable loans from high street banks. However, the narrative is broadly positive. With inflation now below the Bank of England’s 2% target, businesses and individuals increasingly have more cash in the bank. These positive trends suggest that the glass is no longer half empty; it is tipping towards three quarters full.

By Andrew Mitchell, chief executive of North East Finance

This was posted in Bdaily's Members' News section by Colin Garcia .