Report: Equity investment deals in Northern Ireland’s smaller businesses decline by 17% but overall value increases to £94m in 2022

There was a 39% rise in the value of equity investment as smaller businesses across Northern Ireland raised £94 million in 2022, despite the number of deals taking place here falling by 17%, according to a report published by the British Business Bank.

The annual Small Business Equity Tracker reveals there were 34 deals involving Northern Ireland firms in 2022, down from 41 in 2021 but still 21% higher than 2020 when 28 agreements were completed.

Across the UK’s 12 nations and regions only four showed an increase in deal values compared to 2021 with Northern Ireland showing the second highest percentage increase in value behind Yorkshire and The Humber.

Susan Nightingale, UK network director Northern Ireland, British Business Bank, said: “2021 was a record year for equity investment in Northern Ireland’s smaller businesses with the number and value of deals both increasing significantly.

“While the number of deals fell back slightly in 2022, broadly in line with the rest of the UK, it was pleasing to see the deal value increase by 39%, however, we know this percentage increase was influenced by a handful of high-value deals rather than a rising tide.

“Northern Ireland is a great place to do business and we see a growing list of investors who want to support local companies. The Bank is also committed to supporting smaller businesses here to access the right finance for them and it was pleasing to see 39% of all equity deals in Northern Ireland in 2022 being supported by government funds.”

Across the UK the total value of equity investment in small businesses declined by 11% to £16.7bn in 2022, driven by a downturn in market conditions.

The total number of deals also saw a modest decline of 7%, falling from 2,912 in 2021 to 2,702, the first annual drop in equity deal volumes since the Beauhurst data series began in 2011.

Across the UK growth stage investment declined by 25% to £8.2bn in 2022 and was 54% lower comparing the first and second halves of the year. A key reason for this has been the lack of exit opportunities via trade sales or public listings, causing investors to avoid larger deals as they attempt to preserve their capital.

This overall trend has continued into the first three months of 2023, during which £2.2bn was raised by UK small businesses – a 28% drop in investment value compared with the last quarter of 2022.

Across the UK, university spinouts received 12% of total equity investment in 2022, at a value of £2bn. The average deal size for university spinouts was £8.9m, which was 33% higher than the wider market. Of all equity deals in the UK in this year, 8% were in university spinouts, totalling 226 deals.

Out of the 34 deals which took place in Northern Ireland, nine of them were Queen’s University spin-outs. Cleantech and life sciences investment strong in Northern Ireland.

While tech companies continue to receive the majority of UK equity finance, overall investment value in the sector fell by 11% in 2022. Certain sub-sectors still experienced investment growth during the year, despite the decline in overall small business equity finance. The cleantech sub-sector in particular bucked the trend of the wider market, with equity investment in this area increasing by over 50% to £0.9bn.

There were three Northern Ireland deals into cleantech, one of which was valued at £5million with Lumenstream, a Belfast company which specialises in upgrading commercial and industrial businesses to LED lighting for zero capital expenditure.

In Northern Ireland there were also five deals in 2022 into life sciences, one of which was valued at £9.9million into Re-Vana Therapeutics, a spin-out from Queen’s University which is developing technologies for photocrosslinking for ocular drug delivery.