The Bank’s Small Business Finance Markets 2024/25 report found that during the first three quarters of 2024 the investment value of announced equity deals involving smaller businesses in Scotland rose 14.2% on the same period the previous year to reach £407 million.

The rise was more than double the UK-wide increase of 6.6% and put Scotland on track to record the third highest annual figure for equity investment in the last decade. Only the standout years of 2021 and 2022, when there were £417m and £562m of deals respectively, were better.

While the number of transactions dropped slightly by 1.5% to 135, this was the second best year-on-year change among the UK’s Nations and regions and well ahead of the average drop of 24.3%. Only the North East of England saw an increase in transactions at 2.4%, and Scotland ranked top for deal numbers outside of London, overtaking the South East.

Smaller businesses’ use of external finance dropped by 18 percentage points during the first six months of 2024 in Scotland to 41%, amid a challenging economic environment throughout the UK. However, it was still the second highest rate for H1 in recent years, indicating a return to more normalised levels.

In late 2023, the British Business Bank launched its £150m Investment Fund for Scotland to increase the availability and supply of finance to all parts of the country. In its first year, the fund committed more than £10m to smaller Scottish businesses, through loans ranging from £25,000 to £2m and equity investments up to £5m, including Wilsons Pet Food, biotech Ingenza, and Sky-Pin Drones.

Susan Nightingale, director, UK network, devolved nations at the British Business Bank, said: “Our report’s findings underline the strength and resilience of Scotland’s smaller business community and the financial ecosystem that supports it. With interest rates on a downward trajectory, financing conditions are improving and that should create a more supportive environment for finance into 2025.

“If we are to achieve the growth we all want in the UK economy, it is important that we continue to make the case for business investment which can help drive the economy, lift wages and improve living standards.

“In its first 12 months, the Investment Fund for Scotland has provided ambitious business owners across the country with the support they need to turn the next stage of their plans into reality. With more than £10m committed, we hope to build on that momentum and provide even more firms with the funding that best suits their needs, wherever they are based and whatever sector they are part of.’