A new report has revealed that East Midlands businesses attract the majority of its investors from London and very little locally.
The British Business Bank data showed that across the region half of all equity deals (50%) involved investors from the capital.
Meanwhile 15% came from local funders.
In Leicester, just 6% of deals done were with investors from the city.
The British Business Bank’s first annual Regions and Nations Tracker also found regional disparities in access to funding.
Despite hosting 55% of UK businesses, London, South East, the North West and the East of England accounted for 86% of equity investment since 2011.
Compared to the East Midlands, which houses 7% of the business population and receiving just 2% of equity finance.
Catherine Lewis La Torre, CEO of British Business Bank, said:
“The lower flows of finance in certain regions and localities reflect a population of businesses operating with fewer choices. These gaps in growth finance are undoubtedly holding back ambitious entrepreneurs and lead to wasted economic potential. This is something the British Business Bank is committed to changing.”
The Tracker details that the UK’s uneven distribution of growth finance is not driven by a lack of high growth potential businesses in areas, but by the presence of local investors.
It shows that investors are far more likely to invest in businesses close to their office, with 82% of equity investment stakes involving companies and investors within two hours of each other and 61% within one hour of each other.
The East Midlands, however, has the third highest proportion of investor-investee pairings outside the two hours travel time at 45%.
Dr Sophie Dale-Black, UK Network Director, Midlands at the British Business Bank, said:
“The British Business Bank’s first annual Regions and Nations Tracker shows that funding disparities still remain across the UK, including in the East Midlands which has built strong links with London for attracting investment. We are committed to addressing these gaps in access to finance, with the Midlands Engine Investment Fund and the Bank’s other initiatives already delivering a real impact – ensuring firms have the funding they need to succeed.
“The East Midlands is home to a community of ambitious, high growth potential businesses. It is critical that these businesses are supported, with the report reaffirming the need for increased collaboration and the development of strong regional funding ecosystems.”
86% of businesses supported by British Business Bank’s programmes are based outside of London, with £943m invested.
The Bank’s dedicated regional fund, the Midlands Engine Investment Fund, has invested £123m in over 400 smaller businesses, while also securing an additional £126m in private sector leverage.