Regional asset manager invests £11 million in seven weeks of lockdown

One of the region's most active investors in regional SMEs, has invested over £11m in the seven weeks since the lockdown began.

Recent investments include Cheltenham-based Software as a Service company Enate, Oxford-based OxGene and Coventry University Spin-out CyberOwl.

Mercia Asset Management has completed 26 transactions during the crisis, including new investments and support for its existing portfolio companies.

The asset manager, which has around £300 million in unrestricted free cash within venture capital, private equity and debt to invest - is now urging entrepreneurs and business owners to press ahead with their growth plans as the lockdown is being unwound.

Mercia’s CEO Mark Payton says it is now more important than ever that businesses outside London receive their fair share of both investment and government support, or the regions face losing the gains they have made in recent years.

“With nearly 80% of high-growth businesses based outside of London, regional SME investment will be crucial to economic recovery and to building the technology and healthcare industries of the future,” he says. “Regional SMEs have historically been underserved by finance providers. During the financial crisis of 2008 the funding disparity between London and the UK regions rapidly grew, with investment in the North and the Midlands falling by circa 70% compared to a 55% drop in London and the South East.

“It took until 2018 for regional investment to recover to pre-crisis levels. Since then we have made real progress in closing the gap and many regional cities are now thriving hubs. However, the predicted recession caused by COVID-19 could be even deeper than the last and we must ensure the regions don’t suffer disproportionately once again.

Mark said the new trading environment required innovative thinking on how to make better use of existing capital solutions. For instance, relaxing the ‘seven-year’ rule which prohibits Venture Capital Trust (VCTs) from supporting more established businesses could release some £600m to kickstart the economy.

Mercia has around 400 portfolio companies throughout the UK and around £800m of assets under management, through its own capital and the funds it manages on behalf of third parties.

Mark said businesses also had a role to play and should not be deterred by the prospect of a downturn. He added: “Some of the most exciting businesses we see today – including some of the healthcare firms involved in the fight against COVID-19 – started up in the wake of the last recession.

“Unlike then, this time there is investment capital available from Mercia and other sources. It is vital that entrepreneurs and managers with valid commercial prospects continue to pursue their ambitions as by doing so, they will be playing their own part in their region’s, and thus the UK’s economic recovery.”