The growth economy post covid - A different way forward - BGF in partnership with Delineate
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the growth economy
post covid
A different way forward
BGF in partnership with Delineate
2 3
Foreword about the sample
Delineate carried out the research in October and Gender of respondent
November 2020. The sample consisted of 532
executives, board members, senior managers, owners
and partners of businesses. Businesses had to have
a turnover of more than £2 million and at least 20
29% 71%
employees. BGF portfolio companies were excluded.
female
Percentages may not add up due to rounding.
Male
Andy Gregory, head of investments,
UK and Ireland, BGF Number of employees
Where companies are based
70%
62%
London & the South East 202 60%
East of England* 35
50%
Midlands 75
In October 2020, BGF published a report in Building on the original report, BGF commissioned
North West 74
partnership with the University of Buckingham research firm Delineate to carry out a survey 40%
that examined the funding landscape for growing between October and November 2020 to understand North East, Yorkshire & Humberside 58
businesses in the UK. Co-authored by the historian the concerns, hopes and needs of the senior Scotland & Northern Ireland* 38 30%
24%
Sir Anthony Seldon and BGF executive chairman managers who lead growth economy businesses. Wales & South West 50
20%
Stephen Welton, the report drew on interviewees The researchers spoke to 532 executives, board TOTAL 532 14%
with some thirty people at the top of their fields in members, senior managers, owners and partners of
10%
finance, business, government and journalism. The businesses with at least 20 employees and turnover in
* Base sizes small, percentages given are indicative only
report also published, for the first time, the results excess of £2 million. To ensure that the research was 0%
of exclusive research carried out by PwC. fully independent, BGF portfolio companies were Small (10-49) Medium (50-249) Large (250-499)
excluded.
The report identified 21,400 companies in the UK
that are fast-growing, big enough to have outgrown The results are contained in this booklet. We believe Turnover of business
early-stage funding, and yet generally too small to they reveal important truths about the challenges and 35%
list on stock exchanges. These companies are “the opportunities facing the growth economy. Getting
30% 31%
growth economy”. On average their revenues are to grips with these findings is essential for the UK to 30%
rising at twice the pace of GDP. They are dispersed move forward in the post-Covid world. 27%
across all four nations of the UK, providing 25%
employment in every region.
The report showed that these companies suffer
“Getting to grips with these 20%
from a shortfall in business funding, particularly findings is essential for the UK 15%
from a shortage of equity finance, and estimated that
the overall funding gap for these businesses was in
to move forward in the post- 11%
the region of £15 billion. Covid world.” 10%
5%
2%
0%
£2-5m £5-10m £10-50m £50m+ Prefer not to say
4 5
a story of resilience 50%
40%
Figure 2. Revenues during the pandemic
44%
41%
30%
It is clear that the Covid-19 crisis has dealt the UK a strong sense of resilience among growth economy
an economic blow the likes of which have not been companies. Despite the challenges of Covid-19 and 20%
14%
seen in decades. At the same time as businesses have Brexit, three-quarters of respondents said they were
been dealing with the disruptions of the coronavirus, still motivated to grow their business in the next 12 10%
they have also had to prepare for a period of months (see fig.3).
uncertainty following the end of the Brexit transition 0%
Revenue has Revenue has Revenue has
period on 31 December 2020. “Despite the challenges of fallen remained stable increased
Fig.1 (below) shows that two-thirds of respondents
(67%) feel that Covid-19 has created significant
Covid-19 and Brexit, three-
barriers to growth for their business, while 57% quarters of respondents said Figure 3. Despite the external challenges of
predict that Brexit will create significant barriers for
them. they were still motivated to Covid-19 and Brexit, I am still motivated to grow
my business in the next 12 months
Of course, not everyone has suffered in the grow their business in the next 80%
75%
pandemic (see box on Gousto, page 6), and many
businesses see growth opportunities related to Brexit;
12 months.”
60%
however, the evidence from our survey confirms
Fig.4, which asked about respondents’ plans
what many feel - the year 2020 has been extremely 40%
for 2021 in more detail, revealed a slightly more
challenging.
complex picture, with 12% of respondents saying
20% 16%
Fig.2 shows why businesses are concerned. Forty- they intended to de-risk part of their equity 9%
four percent of firms in our sample said their shareholding next year and 4% saying they intended
0%
revenues had fallen during the pandemic compared to sell the business. Nevertheless, a clear majority Agree Disagree Neutral
with only 14% who said revenues had gone up. reiterated their commitment to growth and only
All this would appear to add up to a rather gloomy 17% said they had no hope or intention to grow the
picture. However, what our survey also identified was business next year.
Figure 4. Hopes and intentions for 2021
70%
Figure 1. Barriers to growth 60%
60%
50%
Covid-19 has created
significant barriers to 67% 19% 15%
40%
growth for my business Agree
Neutral
30%
Brexit will create Disagree
significant barriers to 57% 24% 19%
20% 17%
growth for my business
12%
10% 8%
4%
0%
I intend to grow I have no hope or intention I intend to de-risk part of I intend to sell Don’t know / Other
the business of growing the business my equity shareholding my business
6 7
opportunities
“The pandemic has forced
many businesses to resort
and obstacles
to borrowing and there is a
serious risk that the cost
of servicing these debts will
constrain business expansion
Further evidence of a resilient mindset among in the years ahead.”
growth economy companies was revealed when
respondents were quizzed about their most
promising business opportunities next year. The Figure 5. Greatest business opportunities in 2021
most popular choice was market growth (fig.5),
35%
followed by international expansion, entry into new
sectors in the UK, and taking market share from 30%
30%
competitors. The spread of answers indicates that
growth economy businesses are targeting a range of 25%
methods as they seek to expand. 23% 22%
There are tangible obstacles, though. When asked 20%
about the factors that were stopping their businesses 15%
from growing, respondents were most likely to say 15%
“there is too much operational risk in the sector in
10% 8%
which my business operates” (fig.6), a result that
seems likely to be related the Covid-19 pandemic,
5%
which has significantly disrupted many sectors.
3%
The second-most popular choice was “there is not
0%
enough demand for our products and services”, a How the pandemic gave Gousto a boost
Market growth International Entering new Taking share from Bold-on Other
result which may also be connected to Covid-19. growth sector/s in the UK competitors acquisition/s
The disruptions caused by the coronavirus
Businesses in the hospitality sector, for example, have not always been a hindrance to
have been struck by a severe fall in demand for their businesses. In fact, for some companies - in Figure 6. What’s stopping your business from growing*?
services this year, though it is important to note that the e-commerce sector, for instance - the 30%
this demand has not necessarily gone for good and pandemic has accelerated growth. 27%
26%
may return once the pandemic is over. 25% 24%
Online recipe box delivery service Gousto,
Another finding was that 12% of respondents said 21%
which has been in the BGF portfolio since
there was too much debt on their balance sheet to 20%
2015, saw visits to its website rise tenfold
deliver a sustainable profit. The pandemic has forced
in the early days of the UK lockdown. The 15%
many businesses to resort to borrowing and there is 15%
company went on to complete a funding 12% 12%
a serious risk that the cost of servicing these debts
round in autumn 2020 that valued the 10%
will constrain business expansion in the years ahead.
business at more than $1 billion, giving it the
BGF has written before that growing businesses
coveted status of a “unicorn”. 5%
5%
need more funding options than only debt. In the
following pages, we will explore the availability of
0%
equity finance for growth economy companies, and
Too much Not enough Too much Not enough Too much debt I am not Other None of
attitudes towards it. operational risk demand risk in seeking senior on the balance personally these
in my sector for our products investment management sheet to deliver motivated
/ services to grow my sustainable profit to grow the
business business
*Respondents could select more than one response
8 9
adapting and thriving Figure 8. Some things change, some stay the same
Businesses have not been idle during the pandemic. Of course, some firms had to take more drastic The pandemic prompted us
to make permanent changes 61% 24% 16%
In fact, part of the resilience shown by growth action. The second-most popular adaptation was to our business model Agree
economy companies stems from their adaptability, to reduce headcount, an unfortunate outcome. We
Neutral
which has taken various forms. The most popular will discuss more about changes to staffing levels
Teams have been able to work Disagree
adaptation declared by respondents was investment on pages 10-11. Other firms had to discontinue as effectively as usual during 60% 20% 21%
in digital infrastructure (fig.7). For many businesses, operations in some areas of business as a result of the pandemic
system upgrades and other investment was needed to the pandemic, while others still adapted by changing
allow their staff to work effectively from home during their route to market. Again, there were positive
coronavirus lockdowns. Although these investments signs. More than a quarter (27%) of businesses
were, to an extent, forced on management teams, reported that they had entered new sectors during
these upgraded systems will be a positive legacy the pandemic, while 17% said they had not made any
of the virus. Online collaboration tools, cloud significant changes to business operations.
computing and other digital investments ought to
pay dividends in the years ahead. Given all the measures taken, it is perhaps not
surprising that 61% of respondents said the
pandemic had prompted them to make permanent
changes to their business model (fig.8). These
changes are likely to vary greatly from sector to
sector, but are likely to include more flexible working
for staff, an increased use of videoconferencing, and
a greater emphasis on e-commerce as opposed to
“The trends identified in our survey
traditional bricks-and-mortar premises.
match the anecdotal evidence reported to
Part of the willingness to make permanent changes
Figure 7. Adapting during the pandemic* us by businesses in our portfolio. Clearly,
may stem from satisfaction, among business leaders,
40% the Covid-19 crisis has been incredibly
36% at the way their staff handled this difficult period.
33% challenging. Businesses have been forced to
Sixty percent of respondents said teams had been
30% 27% adapt to new ways of working at a time when
able to work as effectively as usual during the
concerns over revenues, and worries over the
19% pandemic, a clear majority. Of course, there were a
20% 18% 17% health and safety of staff, have been at front
sizeable minority who could not say the same, but
of mind. However, this is not a negative story.
on the whole, we think this result speaks again to the
10% What we’ve found is that businesses that
resilience of growth economy companies. Faced with
acted decisively by investing in the necessary
the coronavirus crisis, teams rose to the challenge,
0% digital technology to allow remote working,
We have or plan We have created We have entered We have discontinued We have changed We have not made adapted where necessary, and in general worked
to invest in digital efficiencies due new sectors operations in some our route to market any significant
for example, will benefit in the long term.”
infrastructure to a reduction in ares of our business changes to our
together to find ways to keep business activity going
headcount business operations in difficult circumstances. Jane Vinson, investor, BGF
*Respondents could select more than one response10 11
Attitudes to staffing
Figure 10. Job satisfaction during the pandemic
Morale has been negatively
51% 24% 26%
affected during the pandemic
Agree
Neutral
Of course, there have been hard choices to make, affected, such as the travel industry, restaurants and
particularly around headcount. Redundancies have bars, these job losses will be painful for staff. The company culture has
Disagree
56% 28% 15%
been made despite the unprecedented measures, However, more than a fifth (22%) of respondents strengthened during the pandemic
such as the furlough scheme, that the government said they planned to hire a few new staff and 5% said
implemented to protect employees during the crisis. they planned significant new hires. If this bullish level
(We will discuss the furlough scheme and other of hiring seems surprising, it is worth considering the
government measures on pages 14-15.) sectors that have benefited from the Covid-19 crisis.
Further job losses are expected as this government
support inevitably tapers off. When asked about
staffing levels, 21% of respondents said they planned Gousto, as mentioned above, has accelerated its
to make a few redundancies in the months ahead growth plans this year and now plans to open three
and 8% said they planned significant redundancies We will hire a significant number of new staff
new fulfilment centres and employ an additional
(fig.9). In sectors that are expected to be most We will hire a few new staff 1,000 people by 2022. Its experience mirrors similar
We don’t plan to change headcount success stories among businesses well adapted to
current trends.
We will make a few redundancies
Given the importance of the staffing question, we
Figure 9. Staffing levels We will make significant redundancies
have split this data by region. The data indicates that
businesses in London and the South East are most
1% likely to say they plan to make redundancies, while
6% 5% 6% 7% 6%
12%
16%
businesses in the East of England and the Midlands
are most likely to say they plan to take on new staff.
20% 29% 27% 18%
22%
22% Businesses in Scotland and Northern Ireland were
21% most likely to say they did not plan to change their
headcount.
Linked to the question of staffing levels is the “It is reasonable to think that
issue of employees’ job satisfaction (fig.10). Here,
43%
38%
36% 61% 48% we discovered an interesting contrast of opinion.
morale at companies that are
49%
45%
47%
Slightly more than half (51%) of respondents said forced to make layoffs will be
that morale at their organisation had been negatively
affected during the pandemic. However, a larger
put under strain. However,
26%
proportion (56%), said their company culture had many teams have pulled
24% strengthened during the Covid-19 crisis.
21%
18%
18%
20%
It is reasonable to think that morale at companies
together in recent months,
showing admirable strength of
11% 19%
that are forced to make layoffs will be put under
8% 11% 10% 8% strain. However, many teams have pulled together
character and courage in the
6% 7% 5%
3%
Total London East of England* Midlands North West North East, Scotland & Wales in recent months, showing admirable strength of
& South East York &
Humberside
Northern Ireland* & South West character and courage in the face of adversity. face of adversity.”
* Base sizes small, percentages given are indicative only12 13
The importance of ESG
ESG is growing in importance as a means of
assessing businesses. The term encompasses a
variety of different metrics, including, for example,
a company’s carbon footprint, the independence
Another aspect of business that has been and diversity of its board, whether it partakes in
highlighted by the pandemic is the importance activities considered controversial, such as gambling
of good governance. Companies in our sample, and tobacco, and what labour standards are applied
having turnover of £2 million and upwards, are an to the workers both within the business and across “These results show the increasing
interesting focus of study because they are in the size its supply chain. Disclosures on ESG matters, as importance of ESG criteria for growth
bracket where questions of governance and strategy with non-financial reporting generally, have tended economy businesses. At BGF, we are
Figure 11. Three-quarters of
really start to count. No longer in the start-up phase, to be associated with large, listed entities, which increasing our focus on ESG in our
companies have boards
these businesses are obliged to look at their own both attract more attention from the public, and investment approach - this means rigorous
structures of governance and put plans in place to have more resources available, than growth economy assessment of the potential investee
ensure their future growth is sustainable. companies. Therefore it is encouraging to see so companies to establish their credentials,
many firms in our sample embracing the importance as well as ongoing support and specialist
Three-quarters of our respondents said their
of ESG through strategy commitments. expertise, delivered by our Talent Network,
company had a board, a good marker of a business 75%
to assist portfolio businesses in improving
that is prudently run (fig.11). Likewise, many Equally encouraging is the finding that 44%
their ESG scores. Besides these measures,
of the respondents said they had governance of businesses in the sample have a diversity and
we aim to increase the proportion that
strategies (fig.12). The most widely held was a inclusion (D&I) strategy. Again, D&I tends to
BGF invests in sustainable, or ‘clean growth’,
health and safety strategy and policy, which 65% of be associated with the efforts of large businesses
businesses to 20%, up from roughly
respondents said their organisation had put in place. to make their working environments open and
5% today.”
Following that were the 45% of respondents who welcoming to a wide range of potential employees,
said their business had an environmental, social and regardless of race, gender, sexuality and disability Stephen Welton,
governance (ESG) strategy. status. What our survey suggests is that growth executive chairman, BGF
economy businesses also recognise the value of
diversity in the workplace and are taking concrete
steps to help to achieve it. Fig.13 helps to confirm
what we have already implied - that companies are
more likely to implement ESG and D&I strategies
Figure 12. Which of these governance strategies are in place? as they grow bigger.
70%
65%
60%
60%
50%
45% 44% 50%
41%
40% Figure 13. Big companies,
by number of employees, are 40%
31%
30% more likely to have ESG
and D&I strategies 30%
20%
20%
8% ESG
10%
D&I 10%
0%
0%
Health and Safety Environmental, Diversity and Competition strategy Bribery and None of the above
strategy and policy Social, Governance Inclusion (D&I) and policy corruption strategy Small (10-49) Medium (50-249) Large (250-499)
(ESG) strategy strategy and policy14 15
funding amid covid-19
Figure 15. Relations with banks during the pandemic
42% 27% 31%
My bank has been slower than usual
to respond during the pandemic
The pandemic has complicated the environment Agree
for business funding in the UK. Exactly half of Neutral
Figure 14. It is harder
respondents said it was harder to access funding now
to access funding now then My bank has been very supportive
Disagree
than a year ago (fig.14) - a concerning finding as it 56% 29% 15%
it was a year ago of the business during the pandemic
implies the pandemic has imposed a constraint on
business growth.
16%
When asked about the relationships with banks,
our respondents had had mixed experiences
Agree
(fig.15). Forty-two percent said their bank had been
slower to respond than usual during the pandemic Neutral
Figure 16. Sources of funding accessed during the pandemic
- understandable given the disruption of the Disagree
40%
coronavirus but no doubt frustrating for businesses 34%
with urgent needs. On the other hand, more than half 30%
27%
of respondents (56%) said their bank had been very
34% 50%
23%
supportive of the business during the pandemic. 19% 19% 19% 18%
20%
When asked what sources of funding respondents 12%
8% 8%
had accessed during the pandemic, there was again a 10%
range of answers (fig.16). The most popular funding 2%
source was the furlough or job retention scheme, 0%
Furlough / Coronavirus Private Personal Government Bounce Other bank Friends and Other Other None of the
accessed by about a third (34%) of businesses in job retention Business equity investment Future Fund Back loans family Government funding above / not
the sample. This was followed by the Coronavirus scheme Interruption funding Loan funding accessed any
Loan Scheme additional
Business Interruption Loan Scheme (CBILS), Scheme (BBLS) funding
accessed by more than a quarter (27%). Interestingly, What business funding can do (CBILS)
private equity funding was accessed by nearly a One benefit of the Covid-19 pandemic
fifth (19%) of businesses, making it the third most is that it has highlighted the importance
popular funding source on the list, ahead of both the of healthcare businesses and the essential Figure 17. Areas of business investment during the pandemic
Future Fund and the Bounce Back Loan Scheme services they provide. HealthShare, which 50%
(BBLS). The relative popularity of private equity as offers community-based musculoskeletal 45%
a funding source testifies to the value private equity diagnostic and care services, is one of 39%
40%
investors provide in this marketplace, both as sources nearly 40 healthcare businesses to have 32% 31%
of funding and as suppliers of expertise and support received BGF funding. With £13 million 30% 28%
as businesses undergo restructuring or expand by of equity financing, the business is
24%
22%
acquisition. We explore more about the attitudes to pushing ahead with plans to expand its 20%
15%
equity finance on pages 18-19. patient offering, delivered by a team of 11%
Fig.17 shows what businesses have been investing about 300 doctors, physiotherapists and 10%
in during the pandemic. Echoing the finding in fig.7, rehabilitation specialists. 2%
investment in technology and digital infrastructure 0%
Technology/ Employee Equipment Training Sales and Research and Recruitment Bolt-on Other None
topped the list, followed by employee retention, digital retention marketing development acquisitions
equipment and training. infrastructure16 17
growth plans for 2021
Figure 19. Which funding provider do you turn to first to help fund business growth?
60%
50% 48%
40%
30%
Clearly, 2020 has been an exceptional year, in Fig.20 indicates a positive finding. Despite the
which many businesses have resorted to exceptional challenges mentioned above, 73% of respondents 20% 17%
measures to stay competitive. They may have said they were in a stable financial position to
relied on schemes such as CBILS and BBLS, when pursue growth in 2021. 8% 8%
10%
5% 4% 4%
ordinarily they would be wary of taking on too much 3% 2%
debt. The spectre of an overly indebted growth 0%
economy is a concern for many in the business Bank Private equity / HNW Capital Family and Credit card Crowdfunding Other None of the
venture capital individuals / markets friends above
community. Fig.18 indicates the scale of the problem Angel investors
by showing that 38% of respondents aim to refinance
their balance sheet in 2021.
Which funding provider is their first port of call
in this refinancing effort? Perhaps unsurprisingly,
banks are still the most-popular first choice, selected Figure 18. Will you Figure 20. Are you able to
by nearly half of respondents (fig.19). It is notable, refinance your balance implement a growth strategy
though, that private equity and/or venture capital sheet in 2021? in 2021?
was chosen by 17%. In other words, nearly a fifth
of respondents would turn to private equity or 14%
venture capital backers before their bank manager,
a testament to the important support that these 23% 4%
38%
investors provide to the growth economy.
73% A business laser-focused on growth
The third most-popular answer to this question
was high-net-worth (HNW) individuals and/or angel One company that has made good use of
investors, followed by capital markets. The split 48% equity finance is Scottish photonics and
between these two choices indicates the diversity of quantum technology developer M Squared.
our sample - angel investors are typically used by Starting in 2012, BGF invested £6.4 million
smaller businesses, while capital markets tend to be Yes, we are in a stable financial in three rounds of funding to support its
Yes
accessible only to larger firms. A smaller proportion position to pursue growth pioneering work, helping the business expand
of respondents said they would turn to family or No
No, we do not have the funding tenfold. The pandemic has not stopped the
friends, followed by those who said they would rely available to pursue growth
I don’t know company moving ahead with its growth plans.
on a credit card. Interestingly, all of these methods I don’t know In 2020, the firm announced £32.5 million
were more likely to be chosen than crowdfunding. in new financing, including £12.5 million
Although crowdfunding platforms such as Seedrs from the newly formed Scottish National
and Crowdcube are a valuable innovation, and can Investment Bank. As part of the deal, BGF
be helpful for funding growing businesses, our realised the majority of the value of its
research suggests they are not yet an indispensable shareholding, crystallising an excellent return.
funding source for most growth economy firms.18 19
views on equity finance 15%
6%
16%
Less than £1m
The upheavals of the pandemic, and uncertainty Part of the challenge is connecting these investors Figure 22. What amount £1-5m
about Brexit, have caused businesses to focus on with the recipient businesses. The other challenge of additional equity investment £5-10m
the question of risk and how to protect themselves is overcoming resistance on the part of potential would transform the growth
£10-15m
from it, which perhaps helps to explain why more recipients. Fig.23 shows that a majority of trajectory of your business?
More than £15m
than half of respondents (55%) said they planned respondents are reluctant to give up control of their 30% 33%
to de-risk their personal investments in the business business to obtain funding, though roughly half
in 2021 (fig.21). As with fig.18, this finding implies would consider equity investment. For those who
business leaders will be motivated to seek external expressed this concern, bringing on board an equity
funding in the year ahead. But what form will this partner as a minority shareholder could be a sensible
funding take? solution. This is BGF’s model.
As mentioned, there are concerns that excess Fig.24 shows a recognition of the benefits of Figure 23. Attitudes towards equity investment
borrowing among growth economy companies risks equity investment. The most popular choice was “a
saddling these businesses with too much debt and strengthened balance sheet” followed by “access to
constraining their ability to grow. In this context, additional business and strategy support”.
I am reluctant to give up control of
equity finance has at least one clear advantage my business to obtain funding
60% 27% 14% Agree
over bank lending - there are no ongoing interest Neutral
payments to service.
Disagree
Fig.22 shows the sums of money needed to have I would consider equity investment
53% 28% 19%
a transformative effect on the growth trajectory of to drive growth in my business
businesses in the sample. The most popular choice
was between £1-5 million, followed by the next
bracket up, £5-10 million. In the context of the
Figure 21. Will you de-risk
wider economy, these are not vast sums. There is
your personal investment in the
plenty of capital in the private sector that could fund
business in 2021?
countless businesses with investments of this size.
9% Figure 24. Benefits of equity finance*
50%
45% 45%
40% 37%
36% 55%
30%
20% 16%
10%
3%
Yes
0%
No A strengthened Access to additional Greater opportunity No benefits Other
balance sheet business and strategic for value creation
I don’t know support
*Respondents could select more than one option20 21
regional highlights
The respondents in this survey were asked to state
“If these businesses are right Figure 27. Morale has Figure 28. Have
the location of their company’s headquarters. been negatively affected during the accessed the furlough/job
Although it is beyond the scope of this report to offer to be concerned, there is pandemic retention scheme
a regional breakdown of all the data, in these two
pages we have picked out some of the ways in which
the potential for a kind of
respondents’ sentiments varied according to their ‘destructive levelling-up’
region.
effect - perhaps we should say North West 41.9% North West 44.6%
One notable finding was that businesses based in
London and the South East were significantly more levelling down - as businesses
pessimistic than average about barriers to growth in the capital and the South Total 50.6% Total 34.0%
stemming from Covid-19 and Brexit (fig.25 and
fig.26). If these businesses are right to be concerned, East suffer a greater hit to
there is the potential for a kind of “destructive growth than their peers in
levelling-up” effect - perhaps we should say levelling 0% 10% 20% 30% 40% 50% 60% 0% 10% 20% 30% 40% 50%
down - as businesses in the capital and the South other regions.”
East suffer a greater hit to growth than their peers
in other regions. Although such a blow to the capital
and its surrounding area would hardly be in the
national interest, it is at least some comfort to know
that businesses elsewhere do not share such a gloomy
outlook. Maybe the next year will reveal a story of
“resilient regions” compared with the challenges
faced by London and South East-based businesses.
Another notable difference revealed in the survey Other regional differences from the survey
concerned the North West. Respondents based in (not pictured as charts) include the finding that
this region were considerably less likely than average businesses in the Midlands were more likely than
Figure 25. Covid-19 has created Figure 26. Brexit will create to say that morale had been negatively affected by average to have invested or plan to invest in digital
significant barriers to growth for significant barriers to growth for the pandemic (fig.27). On the other hand, businesses infrastructure. They were also more confident about
my business my business in this region were more likely to have accessed the their growth prospects than the sample as a whole.
furlough or job retention scheme (fig.28). It would Businesses in the North East, Yorkshire and
be interesting to examine this question further to Humberside, on the other hand, were more likely
establish whether usage of the scheme(s) was the than average to have discontinued operations
London &
72.3%
London &
60.9% key factor in supporting staff morale or whether in some areas of the business in response to the
South East South East
other factors, such as team-building exercises, pandemic. They were also more inclined to think
non-financial benefits for staff, or morale-boosting that Brexit would offer new opportunities for their
activities from leadership played a role. businesses, and were generally more positive and
Total 66.9% Total 56.8% motivated to grow in the next year than respondents
whose companies were based elsewhere.
50% 55% 60% 65% 70% 50% 55% 60% 65% 70%22
conclusion
This research report has revealed that growth There will be a large demand for refinancing of
economy companies face significant challenges businesses in the years ahead. Some will do this to
relating to the Covid-19 pandemic. However, help manage their debts, others to allow business
the research also underlines how resilient these owners to de-risk their shareholdings. Our survey
companies are. Businesses have not sat idly and revealed that equity investment is considered a
watched the disruption of the coronavirus unfold viable and shrewd option for many growth economy
around them. They have responded by increasing companies. Not only that, but private equity and
their investment in digital infrastructure to enable venture capital investors are already the second
their staff to work remotely. These and other most-popular choice when growth economy
investment made during the crisis will be an businesses were asked about their first choice for
enduring, positive legacy of the virus. business funding.
Of course, many firms are struggling, and our At BGF, we hope that more businesses consider
research into respondents’ expectations around equity finance as a solution in the circumstances.
growth and their funding needs revealed a mixed Given that many respondents have an
picture. For every business such as Gousto, which understandable concern about giving up control, our
received an unexpected acceleration in its growth model, in which we only take minority shareholdings,
due to the lifestyle changes brough on by Covid-19, has an important role to play here.
there are companies whose business models have An increase in business funding for growing
been thrown into doubt. Many firms have been businesses could help overcome the challenges
kept in business thanks to emergency action from created by the pandemic. With concerted, targeted
government in the form of the furlough scheme, action, we can ensure the growth economy not only
CBILS, BBLS and the Future Fund. In the months survives but thrives.
ahead, these businesses will face a reckoning as this
emergency support runs out.
This document includes information which has been
About BGF
extracted from an independent report prepared by
Set up in 2011, BGF is an investment partner for PricewaterhouseCoopers LLP (the “PwC Report”)
growing companies in every sector of the economy by Business Growth Fund Limited and/or its advisers.
in the UK and Ireland. With over 170 staff in 16 The PwC Report was prepared by PwC only for
offices around the UK and Ireland, BGF provides Business Growth Fund Limited and solely for the
local expertise to exciting entrepreneurs and small purpose and on the terms agreed with Business
businesses. BGF has invested £2.5 billion since 2011 Growth Fund Limited. PwC accepts no liability
in nearly 350 companies, three-quarters of which (including for negligence) to anyone in connection
are based outside London, making it the most active with the PwC Report or any information in this
growth investor in the world. The BGF model has document, which has not been independently verified
been replicated in Canada and Australia. by PwC.You can also read
