Finance · 1 August 2017

Revealed: Britain’s 25 startup equity investment hotspots

Stock photograph of office buildings and apartments in the Salford Quays area of Manchester, England, United Kingdom.
Research suggests Manchester-based private equity groups are more likely to invest a company still run by its founder

The UK’s community of city-based tech entrepreneurs continued to attract the greatest share of private equity deals in 2016, as new research reveals the country’s most lucrative startup equity investment hotspots.

Using results from its third annual Small Business Equity Tracker, the government-financed British Business Bank (BBB) produced a league table of city councils and local authorities to demonstrate which sectors and regions were pulling in the most private investment.

Reflecting trends in previous years, technology companies bucked a general decline in investment to generate deals worth a total £1.7bn – the highest on record and almost half of Britain’s total equity market.

Looking at where startup equity investment was focused, London continued to dominate. Small companies in the capital generated funding worth £1.9bn throughout 2016. However, London’s total share of all deals declined by three per cent from the 50 per cent registered in 2015.

Meanwhile, hubs of startup activity in other cities began to emerge as strong equity clusters. City councils in Cambridge, Edinburgh, Manchester and Oxford all saw a greater number of equity deals than some local authorities in London.

Despite growth in other regions, the wider picture for the UK caused some concern. After five years of growth in startup equity investment, deals to smaller firms dropped by 18 per cent in number, and four per cent in value in 2016. The BBB attributed this decline to a wider global dip in equity finance.

Commenting on the final league table, Keith Morgan, BBB CEO, said it offered “the most accurate and complete view” of the state of Britain’s startup equity investment market.

While the market here followed the global downward trend in equity investment, there are positive signs of innovative growing businesses receiving significant investment in clusters across the UK,” Morgan added.

Recent figures from professional services organisation EY showed that foreign investment in UK tech companies reached its highest for ten years, with 269 foreign deals, as London maintained its position as the European capital of technology.

However, Morgan conceded that addressing a regional imbalance remained a priority for the BBB.

“Regional disparities continue, however, and that’s something we’re working hard to address. We launched our £400m Northern Powerhouse Investment Fund earlier this year, and this is already providing funding to fund managers who are investing in local businesses.

“We will be introducing similar initiatives for the Midlands, Cornwall and the Isles of Scilly over the coming months.”

Top 25 startup equity investment hotspots in 2016

Rank Local authority district Sector with highest number of deals
1 Hackney London Borough Council Software
2 Camden London Borough Council Software
3 Westminster City Council Software
4 City of London Software
5 Tower Hamlets London Borough Council Business and professional services
6 Cambridge City Council Software
7 Islington London Borough Council Software
8 Lambeth London Borough Council Software
9 Edinburgh City Council Business and professional services
10 Southwark London Borough Council Business and professional services
11 Manchester City Council Software
12 Oxford City Council Life science
13 Hammersmith and Fulham London Borough Council Software
14 Wandsworth Borough Council Business and professional services
15 Kensington and Chelsea Royal Borough Council Business and professional services
16 Bristol City Council Software
17 Glasgow City Council Software
18 Cardiff Council Business and professional services
19 Newcastle upon Tyne City Council Business and professional services
20 Sheffield City Council Industrials
21 Barnet London Borough Council Software
22 Leeds City Council Software
23 Birmingham City Council Software
24 Brighton and Hove City Council Software
25 Liverpool City Council Software

Find out which parliamentary constituencies are producing the most new businesses

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ABOUT THE EXPERT

Simon Caldwell is a reporter for Business Advice. He has a BA in politics and communications from the University of Liverpool, and previously worked as a content editor in the ecommerce industry.

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