Yorkshire and the Humber smaller businesses remain resilient as external finance steadies

Yorkshire and the Humber’s smaller business community has remained resilient, with external finance usage steadying across 2024. This is according to the British Business Bank’s fifth Nation and Regions Tracker, published today, which found that 45% of the regions small businesses used external finance last year, a one percentage point increase.

The region’s equity markets did see deal volumes falling by 18.1% to 68. However, the rise of larger deals meant that deal value still increased by 14.1% to £248m. The relative fall in activity mirrors the wider UK, with nationwide deal volumes falling by 15.1%.

Research and development (R&D) remains a key focus for small businesses across Yorkshire and the Humber, with 44% having invested in R&D in 2024, an 11 percentage point increase on the previous year. 29% of businesses were also undertaking new-to-market innovations.

Demand for external finance among small businesses across Yorkshire and the Humber remains relatively strong. An estimated 40% of smaller businesses in the region are open to using finance for growth, an eight percentage point increase on the previous year, while only 6% see it as a major obstacle, a five percentage point drop on the previous year.

Throughout the last year, the British Business Bank has continued to support many of these businesses to start-up, scale and grow, with 84% of the businesses supported being outside London. In its latest financial year across Yorkshire and the Humber, the Bank newly supported 2,000 companies. This support is expected to generate £1.2bn in additional turnover over the lifetime of the finance while supporting 21,300 existing jobs and creating an estimated 2,200 additional jobs.

Vicky Mears, UK Network Director, North of England and Midlands at the British Business Bank, said: “In a challenging trading environment for many smaller businesses, today’s findings paint a resilient picture for our region. Appetite for finance has remained relatively stable, proving that, businesses across Yorkshire and the Humber are still eager to grow and unlock the benefits of this finance for their business, with demand remaining strong for the year to come.

“There is clearly still demand from smaller businesses for finance to scale and grow despite mounting economic uncertainty, so it’s important they have access to bespoke, targeted funding. As a Bank, we’re continuing to ensure we serve the entirety of the UK, particularly those areas that have been left behind in the past. With our Start Up Loans programme, Northern Powerhouse Investment Fund II (NPIF II), and incoming clusters across the North, we’re ensuring we’re there for businesses of all sizes.”

The national picture

External finance use among smaller businesses across the UK saw a slight decline in 2024 (-1 percentage point) to 45%, consistent with a trend of stabilisation since the sharp recovery (10 percentage point increase) in 2023.

The report also shows that the type of finance use remained stable from 2023 to 2024, with small UK-wide declines of 2 percentage points for grants, overdrafts, and credit cards. Credit cards continue to be the most used finance type (15%), followed by overdrafts (11%), and leasing/hire purchase/vehicle finance, which ranked third (10%).

BVA BDRC’s SME Finance Monitor indicates that smaller businesses had more appetite for risk in 2024, with the proportion of ‘Ambitious Risk Takers’ - smaller businesses that want to grow and are willing to take risks - increasing from 27% in 2023 to 31% in 2024[1]. This was reflected in the Nations and Regions Tracker, which found that smaller businesses’ openness to using external finance to drive growth rose by 5 percentage points (up to 38% UK-wide).

Despite this, caution still remains. 19% of businesses that were open to considering finance to grow thought it would be difficult to secure it, and overall business sentiment remained muted.

Richard Bearman, Chief Development Officer of British Business Bank, said: “In the face of a challenging economic environment, it is encouraging that use of external finance has remained stable. This year’s Nations and Regions Tracker also indicates that optimism is brewing for small businesses and we hope to see this reflected in their use of external finance in the near future.

“The British Business Bank is pivotal to providing businesses across our regions with access to the finance they need. With the expanded capacity of the Bank under the Modern Industrial Strategy, we are poised to build on our existing work across the nations and regions.”