Rory McPherson

This figure accounts for a total of 296 investments across equity and debt.

Annual deal volumes grew by two thirds from 2020 to 2021 alone and the average disclosed cheque size increased from £7 million in 2018 to £9.3m. Venture capital accounted for 50% of 2021 transactions, followed by mid-market private equity leading on 22% of investments and debt funding making up 15% of deals.

The Investment into the UK Circular Economy report found growth capital investor, BGF has been the most active UK circular economy investor over the past four years with 12 deals completed in the sector. Circularity Capital has established itself as the leading specialist circular economy investor with six investments over the same period.

Rory McPherson, corporate finance partner at BDO, said: “The macro market trends have been favourable for dealmaking in the circular economy as environmental, societal, political and consumer trends have all raised awareness of the issues that many Circular Economy businesses are working to solve whether that’s material recovery, circular inputs, smart buildings or circular design.

“With ESG firmly on the agenda, it’s clear the Circular Economy encourages economic innovation and growth - driving disruption across all traditional sectors, and therefore creating value within those industries. The opportunities for entrepreneurs in the sector and investors looking towards it are significant.”

BDO’s research found 33% of Circular Economy deals have been done in the manufacturing and industrials sector, another third have been in food and drink, and 22% have been in retail, leisure and consumer markets.

Todd Mills, assistant director at BDO, added: “There is growing recognition from investors that Circular Economy principles can deliver both environmental and economic benefits.

“This is reflected in the sharp increase in Circular Economy investments in 2021, with entrepreneurs and investors partnering to deliver innovative business models that reduce waste and inefficiencies. With levels of available private equity capital in the UK at an all-time high, more and more investors are turning to the Circular Economy and we expect 2022 to be another record year.”