New data from the British Business Bank’s fifth Nations and Regions Tracker reveals that 44 per cent of North East small businesses used external finance in 2024, down eight percentage points from the previous year.
The tracker highlights a complex picture for the region, with declines in overall finance use but encouraging signs in equity investment and research and development (R&D).
Equity deal volumes rose by 8.6 per cent to 63, making the North East one of only five UK regions to see an increase.
In contrast, deal volumes across the UK fell by 15.1 per cent.
Vicky Mears, UK network director for the North of England and Midlands at the British Business Bank, said: “There has been challenges for businesses across the North East, and indeed the UK, however there’s still signs of optimism, with our equity market still performing relatively well despite drops across the UK.
“Our region is home to some true success stories, with many entrepreneurs still taking risks and investing to grow their businesses despite wider economic sentiment.
“There is clearly still demand from smaller businesses for finance to scale and grow despite mounting economic uncertainty, so it’s important they have access to bespoke, targeted funding.”
Despite the rise in deal numbers, the total value of equity investments in the North East fell by 8.1 per cent to £141 million.
R&D investment is on the rise, with 65 per cent of small businesses in the region investing in 2024, up 24 percentage points from the previous year.
Eighteen per cent reported engaging in new-to-market innovations.
However, broader appetite for external finance remains subdued.
Only 34 per cent of smaller businesses in the North East said they were open to using finance for growth, down four points from the previous year.
Just 11 per cent identified external finance as a major obstacle.
The British Business Bank continues to play a key role in supporting North East businesses.
In its latest financial year, the bank backed 800 companies in the region.
This support is expected to generate £400 million in additional turnover, support 8,200 existing jobs, and create around 900 new roles.
Ms Mears said: “As a Bank, we’re continuing to ensure we serve the entirety of the UK, particularly those areas that have been left behind in the past.
“With our Start Up Loans programme, Northern Powerhouse Investment Fund II (NPIF II), and incoming clusters across the North, we’re ensuring we’re there for businesses of all sizes.”
Nationally, external finance use among smaller businesses declined slightly by one percentage point to 45 per cent in 2024.
The types of finance used remained stable, with minor declines of two points for grants, overdrafts, and credit cards.
Credit cards were the most commonly used finance option (15 per cent), followed by overdrafts (11 per cent) and leasing/hire purchase/vehicle finance (10 per cent).
Appetite for risk appears to be growing.
The proportion of “Ambitious Risk Takers”—businesses willing to take risks in pursuit of growth—rose from 27 per cent in 2023 to 31 per cent in 2024.
Nationally, openness to using external finance to drive growth increased by five points to 38 per cent.
However, caution persists.
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Nineteen per cent of businesses open to using finance for growth believed it would be difficult to secure, and overall sentiment remained muted.
Richard Bearman, chief development officer at the British Business Bank, said: “In the face of a challenging economic environment, it is encouraging that use of external finance has remained stable.
“This year’s Nations and Regions Tracker also indicates that optimism is brewing for small businesses and we hope to see this reflected in their use of external finance in the near future.”
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