The small business finance markets 2024/25 report from the British Business Bank shows that, during the first three quarters of 2024, the investment value of announced equity deals involving smaller businesses in Scotland was up 14.2% on the same period of the previous year at £407 million.

The British Business Bank noted the rise was more than double the UK-wide increase of 6.6% and “put Scotland on track to record the third-highest annual figure for equity investment in the last decade”, in smaller businesses.

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It added: “Only the standout years of 2021 and 2022, when there were £417 million and £562 million of deals respectively [over the first three quarters], were better.”

Analysing the Scottish picture, the British Business Bank observed: “While the number of transactions dropped slightly, by 1.5% to 135, this was the second-best year-on-year change among the UK’s nations and regions and well ahead of the average drop of 24.3%. Only the north-east of England saw an increase in transactions at 2.4%, and Scotland ranked top for deal numbers outside of London, overtaking the south-east.”

It noted that smaller businesses’ use of external finance, comparing the first half of last year with the opening six months of 2023, dropped by 18 percentage in Scotland from 59% to 41%, “amid a challenging economic environment throughout the UK”.

However, the British Business Bank added that it was “still the second-highest rate for H1 in recent years, indicating a return to more normalised levels”.

Susan Nightingale, director for devolved nations at the British Business Bank, said: “Our report’s findings underline the strength and resilience of Scotland’s smaller business community and the financial ecosystem that supports it. With interest rates on a downward trajectory, financing conditions are improving and that should create a more supportive environment for finance into 2025.”

The British Business Bank noted it had, in late 2023, launched its £150 million Investment Fund for Scotland to “increase the availability and supply of finance to all parts of the country”.

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It observed: “In its first year, the fund committed more than £10 million to smaller Scottish businesses, through loans ranging from £25,000 to £2 million and equity investments up to £5 million, including Wilsons Pet Food, biotech Ingenza, and Sky-Pin Drones”.

Wilsons Pet Food, based at Drongan in Ayrshire, secured £1 million of equity from the Investment Fund for Scotland. The deal was done through Maven Capital Partners, which manages the £50m equity component of the Investment Fund for Scotland on behalf of the British Business Bank.

Craig Wallace and his father, Iain, bought the trade and assets of Wilsons in 2017, and have embarked on a major expansion drive.

The business operates manufacturing sites at Drongan and Blairgowrie, and employs 25 people, with plans to increase the workforce on the back of the funding raised.

Ms Nightingale said: “If we are to achieve the growth we all want in the UK economy, it is important that we continue to make the case for business investment which can help drive the economy, lift wages and improve living standards.

“In its first 12 months, the Investment Fund for Scotland has provided ambitious business owners across the country with the support they need to turn the next stage of their plans into reality. With more than £10 million committed, we hope to build on that momentum and provide even more firms with the funding that best suits their needs, wherever they are based and whatever sector they are part of.”

The British Business Bank, established in November 2014, describes itself as “the UK government’s economic development bank”.

Its mission is to “drive sustainable growth and prosperity across the UK and to enable the transition to a net-zero economy, by improving access to finance for smaller businesses”.

The British Bank has a remit to “design, deliver and efficiently manage UK-wide smaller business access to finance programmes for the UK Government”.