Northern England secures £57.5m innovation push from British Business Bank

The British Business Bank has allocated £57.5 million to five innovation clusters across northern England, directing more than half of a new £100 million national funding programme towards businesses in some of the country’s largest regional economies.

Greater Manchester will receive the biggest allocation, at £17.5 million, followed by West Yorkshire with £13.5 million and the North East with £12 million. Liverpool City Region has been assigned £9 million and South Yorkshire £5.5 million, the government-owned development bank announced on Wednesday.

The money will be deployed through the £660 million Northern Powerhouse Investment Fund II, known as NPIF II, and managed by three investment firms, PXN Ventures, Mercia Ventures and Maven Capital Partners. The programme is intended to increase the supply of equity finance to companies with significant growth potential, particularly those operating in industries prioritised by the government.

The allocation puts northern England at the centre of a broader effort to translate the government’s Modern Industrial Strategy into investment outside London and the South East. The 10-year strategy concentrates government support on eight sectors: advanced manufacturing, clean energy, creative industries, defence, digital and technologies, financial services, life sciences, and professional and business services.

Access to capital is one of the obstacles the strategy is designed to address. Ministers have argued that clusters of businesses, universities and specialised suppliers can raise productivity and attract private investment, but that promising regional companies can struggle to secure the finance required to move from early-stage development to commercial scale. The government’s strategy specifically identified Greater Manchester, West Yorkshire, Liverpool City Region, South Yorkshire and the North East among 10 areas for a British Business Bank “Cluster Champions” programme, backed by the £100 million expansion of its regional investment funds.

“The North is home to some of the UK’s most exciting businesses, yet many have historically struggled to access the capital needed to scale,” Adam Kelly, the bank’s managing director of debt and regional funds, said. He said the new clusters were intended to bridge that financing gap while directing investment towards industries considered important to both regional and national growth.

The programme also illustrates the expanding role being assigned to the British Business Bank in economic policy. A five-year government mandate published last year instructed the institution to help promising companies in the priority sectors scale and remain in Britain, improve financing markets for smaller businesses and mobilise more private capital. Its economic capital limit was increased to £25.6 billion, with the bank expected to invest at a faster annual rate.

NPIF II provides loans ranging from £25,000 to £2 million and equity investments of up to £5 million to eligible smaller companies across northern England. According to the bank, the fund has facilitated almost £275 million of investment into more than 400 businesses since its launch two years ago.

Recent transactions give an indication of the companies the programme is seeking to support. Newcastle technology company MySalesCoach secured £1 million from an NPIF II fund managed by Maven, alongside £500,000 from existing investors. Sheffield legal technology business FinLegal raised £2 million through Mercia’s NPIF II equity fund to develop its platform, enter new markets and create 26 jobs. Liverpool City Region ecommerce software company Made With Intent obtained £2.4 million in a round led by an NPIF II fund managed by PXN, with plans to expand in Europe and the United States.

The regional emphasis is deliberate. The industrial strategy calls for public finance and policy support to be concentrated partly around established geographical strengths, including advanced manufacturing in Greater Manchester, the North East and South Yorkshire, financial services in Leeds, and life sciences in Liverpool. The government argues that such concentrations can produce deeper pools of skills, suppliers and research expertise, making regions more attractive to private investors.

The £57.5 million announced on Wednesday is therefore intended as catalytic capital rather than a measure of the clusters’ eventual investment. The immediate test will be whether the three fund managers can use the additional public money to attract private finance into companies that might otherwise struggle to fund expansion.

The remaining £42.5 million of the national £100 million programme is associated with clusters elsewhere in Britain. The government’s original plan identified the West Midlands and West of England alongside Glasgow, Cardiff and Belfast, as well as the five northern English regions receiving Wednesday’s allocation.