The British Business Bank has today (July 6) launched the £200m South West Investment Fund.
The new SWIF will provide funding to small and medium sized businesses across the whole of the South West region, covering Bristol, Cornwall and the Isles of Scilly, Devon, Dorset, Gloucestershire, Somerset and Wiltshire.
The bank believes that this funding, which is part of £1.6bn supplied to the bank from the government, will increase the supply and diversity of early-stage finance for new and growing smaller businesses for various purposes, such as expansion, product or service innovation and new processes, skills or capital equipment.
Chief executive of British Business Bank, Louis Taylor, told BusinessLive that because of the success of the bank’s three previous funds, including the Cornwall and Isles of Scilly Investment Fund, the then Chancellor Rishi Sunak agreed it “should get another £1.6bn to set up the second generation of nations of regions investment funds”.
Read more: The Cornwall & Isles of Scilly Investment Fund hits £100m milestone
Mr Taylor explained: “So one in each of the devolved administrations, there will be a second northern powerhouse and midlands engine fund but then this new South West investment fund, that is the fund focussed on the broader South West region so not just Cornwall and Isles of Scilly it is going to be £200m to invest in the equity and lending to companies in all kind of sectors based in the South West.
“The intention is, to be doing this, that we help companies in the South West to overcome the situation that we have in the UK, where so much financing, particularly of equity, is focused on the London and South East region, rather than in other parts of the UK where fantastic companies exist, great opportunity lies and where we want to encourage more investment.”
The SWIF fund will work by offering a range of commercial finance options with loans from £25,000 to £2m and equity investment up to £5m. SWIF is the first in a series of six new Nations and Regions Investment Funds being launched by the British Business Bank, the government-owned business development bank.
'The South West is home to some of the most creative, innovative and exciting businesses this country has to offer'
A total of £1.6bn has been committed to the new funds to drive sustainable economic growth, which was first announced by the government in the 2021 Spending Review. Chief Secretary to the Treasury John Glen said: “The South West is home to some of the most creative, innovative and exciting businesses this country has to offer. This fund will deliver vital investment to nourish that potential, building on over £300m of levelling up funding to grow the local economy and create well-paid jobs across the region.”
Mr Taylor told BusinessLive that he hopes the fund operates to try to crowd private sector money alongside. He used the example of the Northern Powerhouse Investment Fund, he said: “We have invested almost £400m invested with over £600m of private sector money. that has come alongside it, so the impact of the funds has been greater and that is certainly what we want to do with the South West investment fund too.”
Mr Taylor said he hopes the fund will get an “investment culture embedded into the region”. The funds he explained have been introduced for their unique characteristics, and have been designed in “order to be able to land most effectively in the relevant region”.
Going further, the chief executive explained: “With Cornwall and Isles of Scilly investment fund we found that we were investing a lot more in smaller businesses, so that sort of more micro-finances is a really important element in that part of the South West. Whereas the research we have shows that the part of the North West, closer to Bristol, and including Bristol and Bath and that area, that the needs there are slightly different. So with this South West Investment Fund, a single fund of £200m, we are going to create some sub-funds in there to ensure that the characteristics of the western part of the South West region, vs the eastern part are met properly.”
SWIF will be managed by a team of four fund managers that have been appointed by the British Business Bank including SWIG Finance, FW Capital, Maven and the FSE Group.
SWIG Finance will manage the smaller loans part of the fund, from £25,000 to £100,000, for the whole South West. FW Capital and Maven will manage the debt (£100k to £2m) and equity (up to £5m) funds respectively for the north of the region. The FSE Group will manage both debt and equity for the South of the region.
Mr Taylor said: “We are very keen that the fund managers, firstly, are local, so this is not being money managed by London. So they are going to be local fund managers, managing this money and putting it into local businesses. The idea of that is to try and make it clear for other fund managers that there is an opportunity for them to be fund managers in this region, to expand in this region and create the investment capability.
“There is an element of chicken and egg about this, great opportunities create investment, and investment creates good opportunities. We want to make sure that these fund managers are not just dropping all the money into a small number of businesses in the middle of Bristol, this has got to be distributed across Cornwall, Devon, Dorset, Gloucestershire, Somerset, Wiltshire and parts of those areas as well, into really rural areas and to a decent number of businesses as well.”
The fund managers are external to the British Business Bank.
Mr Taylor explained: “What happens is we undertake a public procurement exercise. We put out a mandate of corporate proposals for fund managers to manage a fund, debt equity, and small business finance in the region. And we’ve had bids in, and on the basis of bids, we compared them through this public procurement process, we have ended up interviewing some, shortlisted them and gone into detail about how they would actually execute this investment mandate. And we’ve ended up with, I’m very pleased to say, four fund managers.”
Applications for funding are made directly to the relevant fund managers who can be contacted via the SWIF website. Mr Taylor told BusinessLive that the fund manager are “motivated” to look at a lot of opportunities and invest the money on a commercial basis, providing access to finance that would otherwise not be there.
The £200m fund has been welcomed by South West business leaders.
Phil Smith, managing director of Business West, said: “Small businesses across the South West tell us there is a real need for more supply and diversity of early- stage finance and this new fund from the British Business Bank will be welcomed because it breaks down barriers and creates more opportunities for growth and innovation.”
Katherine Bennett CBE, chair of the Western Gateway Partnership, commented: “It’s great to see this new fund launched from the British Business Bank. We believe that by working together we have the potential to become the UK’s Green Energy Powerhouse – creating solutions to ensure we can reach net zero and take advantage of the economic opportunities that will come from the green transition. Access to early finance will be crucial for this and I look forward to continuing our work with the Great South West partnership, British Business Bank and other partners to ensure the region’s businesses have the support to grow and prosper.”
'It’s about changing the culture around entrepreneurialism, about giving people the confidence to build their businesses'
Paul Coles, chief executive of the South West Business Council, added: “This fund will provide much-needed investment in the region’s businesses, enabling them to thrive, expand, and contribute to the economic prosperity of the South West. We are confident it will drive sustainable economic growth and job creation.”
Mr Taylor said: “This is about helping business to help bind communities together, a lot will have huge social value, as well as generating economic value as well. So it will be local businesses employing local people, serving local customers. This is an important element of any balanced economy.
“Our data from our existing funds show that a significant number of the companies that receive our investment are undertaking research and development for product improvement, so they are staying ahead and innovating. So it is important for the local economy for innovation.”
He added: “The big pitch is that this is supposed to have a lasting impact on the region, not just on the businesses that we are going to invest in. It’s about changing the culture around entrepreneurialism, about giving people the confidence to build their businesses and those businesses should have social value as well as economic value, which we should recognise.”
Why not sign up to get the latest South West business news straight to your inbox.
