A report by the British Business Bank has found that 51% of smaller businesses across Northern Ireland were using external finance in 2023, a marked increase of 13 percentage points on 2022 and second only to Wales and the West Midlands for exceeding the UK average growth rate.
The Bank’s Nations and Regions Tracker, which analyses the geographic patterns seen in UK small business finance, also found that Northern Ireland had the highest share of businesses reporting confidence in their ability and skills to secure external finance (77%) and to borrow as much as needed on affordable terms (53%).
Just under two thirds (66%) of these businesses felt the trading environment offered more threats than opportunities, slightly above the UK average of 61%. In addition, 86% reported they still felt the impacts of rising costs in recent months (76% in the UK), the highest share of all UK Nations and regions.
Traditional forms of finance the most common
As was the case in 2022, core finance products here remained the most common finance type, with credit cards witnessing the largest upturn in usage, growing to 16% in 2023 from 13% in the previous year.
This was lower than the 6 percentage point increase seen in the UK between 2022 and 2023. However, local businesses stood out for increasing their use of bank loans, up one percent to 14% in 2023, at a time when this finance type was in decline in most other parts of the UK.
Accounting for their share of the smaller business population, Northern Ireland witnessed a large volume of loans and overdrafts approved/increased per 10,000 smaller businesses between 2021-2023 relative to the UK average (440 vs 221), while also having the highest associated value of those applications among all UK nations and regions (£108m).
Happy non-seekers of finance
According to the report, Northern Ireland was the only region to sustain a rise in the share of businesses that self-described as happy non-seekers of finance in 2023, up from 67% to 77% which opposed the general decline/stabilisation that occurred across the UK
Northern Ireland was also the only area of the UK, other than Wales, to see a significant fall in the proportion of smaller businesses with plans to borrow or renew from 15% in 2022 to 5% in 2023.
Decline in equity deals
Northern Ireland is under-represented in UK equity activity. It was broadly in line with the rest of the UK regarding the number of equity deals per high growth enterprise (0.16 vs 0.24) from 2021-2023, but the corresponding value of these deals was well below the UK average (£0.4m vs £1.4m).
According to the Bank’s report, Northern Ireland also experienced the largest decline in equity deals (-33%) among all UK Nations and regions between 2022 and 2023. However, during this period, investment value fell at only half the rate of the UK’s downtrend (-24% vs -48%).
Addressing smaller businesses’ finance access gaps in Northern Ireland remains central to the Bank’s mission
The Bank has continued to invest considerably in Northern Ireland in 2023 and 2024.
The Investment Fund for Northern Ireland, which has committed £70m to support the growth of small and medium-sized businesses across a range of commercial finance options, announced its first debt and equity deals in 2024, with loans and investment worth £100k and £750k respectively.
Businesses in Northern Ireland also benefitted from investment via other Bank-led programmes, such as Start-Up Loans.
Susan Nightingale, Director, Devolved Nations, UK Network at the British Business Bank, said: “While we continue to face a challenging economic environment, it is encouraging to see a renewed appetite for external finance among the business community in Northern Ireland.
“This year’s Nations and Regions Tracker captures a mood of cautious optimism throughout the UK, and one which will hopefully see an uplift this year and beyond.
“The British Business Bank has and will continue to play a pivotal role in providing businesses in the Nations and regions with access to the finance they need. We remain committed to continue our work to unlock potential and help boost long-term growth throughout the United Kingdom.”