TBP NE TIMES NEL 221025-25.jpg — Paul Scott, chief executive of NEL Fund Managers

NEL Fund Managers: Investing in regional growth

For more than three decades, NEL Fund Managers has helped small and medium-sized businesses across the North East turn ambition into growth. Having recently refined its brand and sharpened its focus to deliver more responsive, partnership-led funding, the organisation is enjoying a record period of investment across a diverse range of sectors. Here, chief executive Paul Scott talks to Peter Anderson about the organisation’s evolution, expanding reach and future ambitions.

The North East has long been celebrated for its entrepreneurial drive and innovations that have shaped the world.

From the railway pioneers and industrial titans of yesteryear to today’s leaders in advanced manufacturing, digital technologies and those driving the transition to a green economy, the region has consistently been a hotbed of ingenuity and transformative enterprise.

Latest figures from NatWest and Beauhurst’s New Startup Index show the North East is the UK’s fastest-growing region for start-up activity.

And yet, for many of these fledgling companies, scaling their ambitions is far easier said than done.

Despite the vibrancy of the local innovation ecosystem, access to funding – or even knowing where to turn for it – often remains the biggest barrier to growth.

One organisation seeking to change that is Gateshead-headquartered NEL Fund Managers.

For more than 30 years, NEL has played a pivotal role in providing alternative finance to growing North East businesses, successfully managed 17 investment funds, supported more than 1000 companies and helped create thousands of jobs along the way.

And for Ashington-born chief executive Paul Scott, who joined NEL as chief investment officer in 2022 before taking up the chief executive role last December – bringing with him extensive experience in direct lending, corporate finance and private equity across Europe and latterly leading Bahrain’s sovereign wealth fund investment activities globally – the chance to help North East entrepreneurs unlock their potential was a real draw.

He says: “I’m originally from Ashington – my dad was a miner – so the North East is very much home for me.

“I’ve spent most of my career working in London and internationally in banking and finance, but the pull to come back and help grow the region’s business ecosystem was strong.

“What drew me to NEL was its focus on growth and impact.

“For NEL, it’s not just about providing investment, it’s about helping companies build confidence, capability and a platform for future success.

“And there’s a lot happening in the region right now.

“You can feel the momentum building, and the chance to be part of that – to help grow something meaningful and lasting while supporting the broader North East economy – makes it a really exciting time to be back.”

Since returning to the North East, Paul has been instrumental in reshaping NEL, overseeing a brand refresh, bolstering the investment team, strengthening its board and refining operations to ensure the organisation continues to meet the needs of growing SMEs.

The refreshed brand – complete with a new logo, website and communications strategy – represents more than just a visual update.

It also signals a clearer enhanced value proposition: that NEL is a forward-looking, regionally-rooted fund manager that combines deep local knowledge with a philosophy of offering ‘more than capital’ through flexible, solutions-based investing and a hands-on value add approach, delivered with speed and decisiveness.

Supporting this renewed focus, Paul has reshaped the board with the appointments of Judith Hartley – the former chief executive of British Business Bank commercial subsidiary British Business Investments – and Trevor Castledine, chief commercial officer at LGPS Central.

They have joined NEL as non-executive directors, further strengthening the organisation’s strategic capability and widening its reach with regional and national investors.

Paul says: “NEL has gone through quite a transformation over the last couple of years, from the way we invest to the way we position ourselves.

“We’ve worked hard to make the business more visible, more professional and more proactive.

“Our value proposition is pretty straightforward: we offer flexible, growth-focused finance for SMEs.

“We take the time to understand each business, diving into their model and structuring something that works for them, rather than applying a one-size-fits-all approach.

“It’s not just about deploying capital anymore.

“We sit with management teams, help them plan growth, think about exit strategies and even explore areas like digital transformation or artificial intelligence – practical support that businesses can use – and we do this throughout the life of our relationship, not just up front.

“It’s great to see the changes we’ve made coming through in our results, with excellent portfolio performance and investor returns.

“We also recently won an industry award for the second year in a row, which was wonderful recognition from our peer group.

“Being regionally based is also key.

“It’s great to see national players set up offices in the North East to help build the ecosystem, but it’s not without risk.

“I’ve been around long enough to see cycles of office openings and closures that can be driven by fluid capital flows or strategy shift from businesses headquartered in London and elsewhere.”

Paul adds: “We’re the only private, direct-lending alternative finance provider headquartered in the North East, and that proximity matters.

“It means we can get close to businesses, we understand the region and we can act fast – speed and deliverability are critical for SMEs executing in real time.”

This approach is exemplified by the breadth and quality of firms NEL has supported through its management of British Business Bank’s Northern Powerhouse Investment Fund II (NPIF II), including the NPIF II – NEL Smaller Loans Fund and NPIF II – NEL Debt Finance Fund.

These funds provide investments from £25,000 to £2 million, helping a wide variety of businesses scale and achieve their growth potential.

With more than 150 SMEs now in its portfolio, and having opened an office in Stockton to bring its team closer to Teesside companies, NEL is enjoying a record period of investment.

From cocktail bars and distilleries to tech consultancies, professional services firms and low-carbon enterprises, its portfolio spans a wide spectrum of industries and locations across the North East.

Paul cites Newcastle-based technology consultancy Solution Performance Group (SPG), which recently secured the largest contract in its history with the University of Southampton, and Stockton-based infrastructure integrity testing firm Southern Asset Management, which has expanded into new markets – both of which received follow-on investments from NEL – as examples of how the firm provides finance, guidance and confidence.

He says: “SPG is a perfect example of how investment, combined with practical support, can unlock new opportunities and enable a business to scale successfully.

“We’ve worked with them over a couple of years, providing follow-on funding that helped them secure a major digital transformation contract with the University of Southampton.

“It demonstrates how a North East business, armed with innovation and ambition, can take on projects of national significance – and how the right investment partner can back them to deliver.”

He adds: “It’s the same story with Southern Asset Management.

“They’ve taken on new contracts, recruited more people and are developing greener solutions as they move into onshore wind turbine testing and rail sectors.

“That’s exactly what these funds are designed to do – provide ambitious firms with the backing they need to grow, diversify and create real impact across the region.”

The NEL Fund Managers team

And as he looks ahead, Paul is focused on sustaining the momentum NEL has built while broadening its impact both geographically and in the scale of its investments.

With many SMEs still underserved and mainstream lenders and existing investment managers increasingly focused on national or mid-market businesses, there is a clear gap for flexible private credit solutions that complement public sector funding.

With strong performance and the foundations laid, NEL is exploring the establishment of a new debt fund that would sit above existing public interventions, to provide SME finance that delivers both impact and strong investor returns.

Over time, Paul sees potential to scale this model across the wider north, building a regionally-headquartered private credit firm that competes nationally while staying true to its roots.

That in itself creates impact and high quality employment opportunities for the region.

He says: “It’s taken hard work, but we’re beginning to see the flywheel turn.

“It’s now about keeping that energy going and using it to reach more businesses across the North.

“There’s a huge swathe of ambitious businesses sitting below the radar of traditional lenders, or where existing providers cannot provide the bespoke structures businesses need – and that’s where we see the opportunity – to provide the right kind of capital, structured in the right way, to help them scale.”

He adds: “We’ve shown what can be achieved with targeted, flexible investment.

“The next step is scaling that approach, broadening our investor base and increasing the size and scope of what we can deliver.”