NORTHERN Ireland is the UK’s most reliant region on core debt products such as overdrafts, loans, leasing and credit cards, a new annual tracker has revealed.
And it says that gaps in growth finance in the region, which accounts for just 1 per cent of the UK's entire equity investment, is stymieing ambitious entrepreneurs and "leading to wasted economic potential".
But the British Business Bank (BBB), in its first annual Regions and Nations Tracker, has vowed to change that by encouraging more firms here to consider equity finance from third parties such as business angels, venture capital funds and equity crowdfunding platforms.
The BBB, which is the UK government’s economic development bank, said half of businesses in Northern Ireland were using external finance in 2021, but economic potential continues to be wasted because of regional disparities in access to equity finance and private debt.
The bank's chief executive Catherine Lewis said: “The lower flows of finance in Northern Ireland reflect a population of businesses operating with fewer choices.
“These gaps in growth finance are undoubtedly holding back ambitious entrepreneurs and lead to wasted economic potential. This is something the British Business Bank is committed to changing.”
Some 86 per cent of businesses supported by British Business Bank’s programmes are based outside London, with £943m invested between 2020 and 2021.
Its core programmes are currently supporting £81.8 million of finance in Northern Ireland, reaching 1,773 smaller businesses.
The report points out that access to growth finance is particularly difficult for rural business owners who are more likely to resort to injecting personal funds into their businesses, especially in the construction sector.
It found 38 per cent of rural construction business owners used personal funds compared to 27 per cent of their urban counterparts.
Agriculture, forestry or fishing accounts for 41 per cent of rural businesses in Northern Ireland, with 58 per cent of all businesses here registered in rural locations.
Mark Sterritt, the bank's UK network director in Northern Ireland, said: “Equity finance from third parties is considerably rarer than core debt products here.
“But despite its relative rarity, equity finance makes an outsized contribution to the economy through supporting companies with the potential for rapid growth.
“Companies looking to expand into, or even to create new markets as well as those looking to fuel rapid growth may be unable to secure debt finance due to their risk profile, lack of collateral or variable cash flows.
“For these companies, equity investments that do not come with the need for regular repayments can create a runway to deliver on growth plans.”
