The majority of British equity investment occurs in London and the South East, with regional businesses largely missing out. To help close the ‘equity finance gap’, this briefing fleshes out the case for a British Regional Investment Bank – first made by the Gordon Brown Commission on the UK’s future – that can better match public investment and private sector expertise with businesses that have the potential to drive regional economies.
- Over two-thirds of British equity investment occurs in London and the South East.
- This matters because equity investors identify and develop firms with high growth potential – the sort of firms needed to drive regional economies.
- Regional equity markets face a ‘catch 22’: investors are reluctant to take the risk of setting up in an unproven area, which limits the pipeline of firms in the area recognising the benefits of equity investment and seeking it.
- Recognising these problems, many governments have established successful, large-scale equity investment funds, notably France and Canada.
- In the UK, the British Business Bank has also shown that public investment can be deployed effectively: as of last year it had supported 19 of 33 British ‘unicorns’ and the value of its investments has increased by 51%.
- However, the British Business Bank’s equity investments are as London-dominated as the wider market.
A proposed Regional Investment Bank would build on the skills and good practice developed by the British Business Bank (changing the mandate of the BBB rather than creating a new institution) – clear objectives and delegating investment decisions to operationally independent professionals.
However, it would improve on it in two key ways, by a) orienting it more strongly away from London, and b) coordinating it with regional industrial policy.