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MBM Economic and Investment Round-up

Are we attractive?

A superficial question perhaps at first glance, but a question all start-ups will understand is essential to attracting an investor. The attractiveness of an economy, of a country and even a region, is a key consideration to starting a new business and investing in an on-going one. In June EY published its Attractiveness Survey for both the UK and for Scotland. The reports can be found here [https://www.ey.com/uk/en/issues/business-environment/ey-scotland-attractiveness-survey-2018]

What stands out as immediately clear is that London and Scotland remain the UK's most attractive locations for foreign direct investment, according to EY’s reports.

The survey is designed to examine the evolving performance and perceptions of the UK and Scotland as a destination for foreign investment. Highlighting a continuing trend, the survey shows that London and Scotland remain the prime locations for international companies considering foreign expansion into the UK. 

Between 2012 and 2016, a total of £28bn was invested in the UK, as much as our closest three rivals - France, Germany, the Netherlands - combined. It is reported elsewhere that Silicon Valley investment into the UK is at an all time high at £1.08 billion last year alone. This represents 4.8% of all UK investment in 2017. Clearly the UK remains a very attractive prospect for our US cousins.

More than 10,000 new tech firms opened for business in the UK last year – an increase of 60% on 2016. At the same time, US companies invested a record amount of money in the booming British tech sector.

According to recent analysis by RSM, a total of 10,016 software development and programming businesses were incorporated in the UK in 2017, compared with just 6,300 the year before. London recorded the highest number of annual incorporations at 4,238, a jump of 76 per cent. and Scotland saw an increase of 77 per cent. representing the highest growth in new incorporations in the UK.

Britain is home to eight of Europe’s top 20 universities. The “golden triangle” of Oxbridge and London alone offers six within a 60-mile radius. The results are equally evident: some 40 per cent of Europe’s “unicorns” - new tech companies worth $1bn or more - are British. Names such as Deliveroo, Rightmove, Transferwise willno doubt already be familiar to you and are changing everything about the way people eat, live, and spend. Scotland also benefits from a draw of top universities across the central belt and is well connected to the centre where unicorn, Skyscanner, has grown to international acclaim.

New Money, Money, Money…

There are some new kids on the block and these kids come with deep pockets. In May this year Google joined forces with Orange Digital Ventures (the venture arm of Orange) to launch a new EMEA focused venture capital investor.  The new fund, the size of which has not been announced, is particularly focused on start-ups active in the internet of things, cybersecurity, cloud services, AI, fintech and connectivity solutions sectors.

Following on from the Chancellor’s Patient Capital Review and in an aid to plug a post-Brexit funding gap, the British Business Bank is launching British Patient Capital, a new £2.5bn programme designed to enable long-term investment in high growth potential companies across the UK led by ambitious entrepreneurs who want to build successful, world-class businesses. Investing alongside the private sector, British Patient Capital will support £7.5bn of investment for British businesses and will be seeded with c. £400m of existing and approved venture and growth fund commitments.

Recent press shows that impact investing (investment aimed at having social, environmental and/or ethical impact) is on a steep rise. ClearlySo, Europe’s leading impact investment bank has announced that client capital has now surpassed £200 million.  The jump, which amounts to more raised in the last two years than in the preceding eight years by ClearlySo investors, is attributed to the growing mainstream interest in impact investing.

The new arrivals are not limited to the equity side of the deals. New venture appetite is emerging strongly from some significant debt providers. Barclays has launched a venture capital-style investment division and hopes the new unit will provide a ‘material contribution’ to the bank’s bottom line between now and 2025.  Machine learning, blockchain and intelligent contracts are examples of the types of technology Barclays Ventures will be seeking to invest in.

You may not be aware but Silicon Valley Bank (SVB) has been active in the UK. As SVB described in their recent presentation at our Edinburgh office, venture debt is on the increase. Becker believes the next wave of big tech innovations will come at the intersection of digital health and machine learning. “The combination of these two things, I think is super exciting,” he says. “I think we’re going to see an incredible amount of innovation over the next five, ten, 15 years.” Watch the video above for more from our interview with Becker. http://fortune.com/2018/05/25/silicon-valley-bank-ceo-technology/

Not only have we seen the emergence of these new market player but increasingly MBM Commercial is witnessing VCs investing in what has until recently been the exclusive market of angels and syndicates. In 2017 UK VC investment deals doubled to €7.1bn across 765 rounds putting a greater amount of cash into start-ups and early stage companies.

At the heart of all this activity you will find MBM Commercial, guiding, advising and connecting entrepreneurs and investors. If we can assist you with any aspect of growing your business, investing in a business or connecting with others in the ecosystem, please contact any member of our corporate team.

Alexander Lamley

Senior Associate

Email: alexander.lamley@mbmcommercial.co.uk

Tel: 0131 226 8238

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