With the UK set to face its worst economic decline in 300 years and with unemployment rates expected to hit 7.5%, investment into SMEs has never been more important. The government’s independent forecaster, the Office for Budget Responsibility (OBR) expects the number of unemployed people to surge to 2.6 million by the middle of next year, but could investment into UK SME’s be the answer to tackling the unemployment surge?

SME’s throughout the UK employ around 16million people, highlighting the importance of private capital and investment in these businesses in order to enable growth and furthermore employment as a means to assist in bringing the UK economy back to where it was pre-pandemic.

Figures from the ONS show that SMEs have created jobs at a rate which is three times higher than that of large businesses over the past five years – adding 1.7million jobs compared to around 650,000. This likely stems from the increased capacity to grow from start-up level right through to unicorn status as some firms do.

Despite the current climate, there are a huge number of SMEs that have adapted quickly to the pandemic and the changes it has ushered in, along with a 12% increase in new businesses starting up during 2020. These new businesses are now looking for investment to help their business expand, and with this these new small businesses will be able to provide jobs for the millions left unemployed by the state of our economy.

Private capital is proving to be fundamental in helping UK businesses grow and flourish post-pandemic, and will be a welcomed sight for many SMEs throughout the country. The news of the vaccine’s success is sure to bring investment flowing back into SME’s and start-ups which is key for the resurgence of the UK economy.

Key Statistics:

·         44% of investors are now looking to back UK-based companies rather than global firms –  9,629,000

·         45% of investors feel their ‘risk-appetite’ has increased due to Covid-19, as traditionally safe investments in big companies are no longer viable – 6,942,000

·         27% of investors are looking to invest in sectors created by the Covid-19 pandemic, such as PPE, social distancing equipment and virtual solutions – 5,674,000

·         19% of investors believe the coronavirus pandemic has opened more investment opportunities than it has closed – 6,278,000

CEO of IW Capital, Luke Davis:

“Investment into UK SMEs is proving to be more important than ever to help tackle the vast unemployment rates that we face. SMEs account for the employment of 16million people here in the UK and with investment, these businesses are primed to grow and therefore create jobs.

“It’s truly positive to see an increase in new businesses compared to last year even with the uncertainty and limitations that the pandemic has produced. With more and more people looking to start their own businesses, private capital is proving to be crucial and with the new year bringing hope to investors, we should start to see these new businesses flourish.

“Investors are now looking to back Covid- class assets and small UK businesses over global firms, which truly is great news for SMEs and small business owners throughout the nation. Such use of private capital is sure to see growth for many SMEs, with now being a key time for investment. This demonstrates the sentiment that already exists to help get the UK economy back on its feet and once again a hub for business.

“Making growth investment more easily available to small businesses that are looking to grow should be a priority. The last time that the Government-backed EIS was extended, it resulted in a significant jump in private investment into small businesses. Replicating this effect with new, or increased, incentives would provide a much needed boost to a section of the economy that is most in need, and so we hope this will be addressed in the near future.”