Barclays conducted a review to better understand how local government can help local businesses to secure equity investment across the UK. The review gave consideration to both ‘direct’ action (formal policy delivery; direct investment of public monies; direct provision of advice and services) and ‘indirect’ action (network facilitation; convening and connecting powers; signposting of third-party information) to achieve this outcome.
We ultimately conclude that every nation and region should have access to a place-based investment fund to support businesses in this space, and that local and devolved government has a key role to play in signposting and celebrating this fund in order to grow business trust in and understanding of it.
Our approach
The flow of equity investment – which can be used as a proxy for early stage / high growth business investment – sees considerable variance in both volume and value across UK nations and regions, even when accounting for business population. This risks creating an uneven playing field for businesses seeking to grow.
Barclays already plays an active role in helping businesses to start, scale and succeed in communities across the UK. Over the years we have built considerable expertise in this space through our experience of running our Eagle Labs, Demo Directory and through direct client engagement (among others). However, we wanted to better understand this challenge through the lens of public policy and – specifically – where local government might be able to play a more active role as part of the solution. We therefore undertook a review to explore the following research question:
What is the most impactful role that local and devolved governments can play to support equity investment flows to businesses across UK nations and regions?
We combined quantitative business survey data, with qualitative input from our Regional Heads of Teams (Corporate Bank, mid-Corporates) to inform our final conclusions.
Key thematic findings
Our review of the evidence identified the following key thematic findings:
1. Size matters
There is a significant knowledge gap between smaller and larger businesses on the topic of access to equity finance
2. Local government
It isn’t currently seen as a critical player, but it could be.
3. Business support
If local government were to play a more active role, it would be ‘most useful’ for it to help businesses to navigate the landscape.
4. Regional Funds
The provision of public (or publicly-backed) finance via regional funds can help overcome both equity supply and demand challenges for small businesses
5. Complexity
Found across both local government and business groups, it can severely impact regional growth opportunities in the round.
Policy recommendations
These central findings informed our final four policy recommendations:
1. Place-based, publicly-backed investment fund
Businesses in every nation and region should have access to some form of place-based, publicly-backed investment fund. These funds should bring deep knowledge and connectivity to their work within a locality, and offer specific support options for smaller firms in particular (<250 employees).
2. Active regional promotion of the investment fund
Local and devolved governments should actively promote their nearest place-based investment fund as a source of finance and support for businesses in the region – and smaller businesses in particular.
3. Local governments championing investment opportunities
Local and devolved governments should seek to proactively champion the investment opportunities available in their locality throughout their routine engagement with business.
4. Reduction of hand-offs and divides within regional governance
Where possible, local and devolved governments should seek to reduce the number of hand-offs and divides that exist within a region’s governance – particularly in relation to the development and oversight of economic strategy.
About the author
Barclays’ Group Policy Development team creates public policy thought leadership content on behalf of Barclays. Our work draws on the bank’s expertise, data and insights, and is intended to inform the design and application of public policy solutions in response to pressing economic and societal challenges.