Business Growth Fund investment in Scotland tops £100m

The Business Growth Fund (BGF), an initiative designed to pick up the slack in funding for small firms since the financial crisis, has committed £100 million in Scotland, and a total of £500 million, since its inception four years ago.

The firm, which has invested in 16 Scottish companies since it was launched, makes initial investments of between £2m and £10m, with the potential for extra funding to support further growth.

The cash injections tend to be provided in return for a minority equity stake and a seat on the board for a BGF director.

BGF’s £500m milestone coincided with its strongest-ever quarter, with £71m committed in the first three months of the year, and the fund now accounts for one in every three investments at this end of the market.

Among the Scottish businesses that have so far received funding are Aberdeen-based eyecare chain Duncan & Todd, which received an initial £5.6m in December 2013 and a £3.5m follow-on finance package in February.

Off shore firm Rovop, also based in Aberdeen, has secured £10m from the fund which it said would help expand its fleet of remotely-operated vehicles to about 50 units over the next three years on the back of growing demand for its technology and services as offshore oil and gas companies seek to reduce their costs in response to the fall in crude prices.

However, BGF chief executive Stephen Welton has insisted that its work has “only just begun” for the fund which is backed by banking groups Barclays, HSBC, Lloyds, Royal Bank of Scotland and Standard Chartered.

Mr Welton said: “When BGF launched in 2011, smaller and mid-sized companies were largely overlooked by equity investors, access to long-term capital was scarce and the perception was that demand was non-existent.

“That was completely wrong. The £500m that BGF has rapidly invested would not have been provided without us. That has driven not only investment, but created thousands more jobs in our portfolio companies and unlocked tens of millions of additional debt capacity.”

Other Scots firms backed by BGF include lasers and photonic instruments specialist M Squared, based at the West of Scotland Science Park in Glasgow, which received £3.85m of growth capital in 2012 and a further £750,000 in February.

Graeme Malcolm, who co-founded the business in 2005 with Gareth Maker, said: “We’ve been expanding our business for some time and have been making great headways in world markets. This latest investment will provide important support as we continue to pursue our ambitious growth objectives.”

Simon Munro, regional director for Scotland at BGF, said demand for investment is surging amid a “clear indication of entrepreneurial drive and a supportive business environment” north of the Border.

He added: “Businesses we have already backed are growing fast, gaining market share and demonstrating that they are capable of competing on a national and international stage, given the right backing and support. Yet we know that there are many more companies out there – from a wide range of sectors – which can benefit from the type of support we provide.”

ACS Clothing, the Glasgow-based suit hire business secured a £8.5m BGF deal last year, and £4.2m was provided for AFG Media, the Scots firm behind the Morphsuits range of fancy-dress costumes.