IS NOW A GOOD TIME TO BACK BRITISH BUSINESSES?

The UK’s current economic challenges can actually present strong opportunities for those investing in fast-growing, innovative British businesses, Coutts clients heard at a recent event.

Stephen Welton, Executive Chairman of the UK’s most active growth capital investor BGF, stressed that investing “through the cycle” could prove beneficial.

With inflation rising to record levels and wages failing to keep up, the UK is facing a cost of living crisis, slower economic growth and a weak currency.

But the head of BGF, which invests in UK companies with high growth potential, reminded the audience this wasn’t the first time economic uncertainty had struck Britain. He said such challenges often meant investment opportunities came at an attractive price.

“The starting point for us is to ‘stick to our knitting’,” he said. “At BGF that means continuing to look for good investment opportunities throughout the economic cycle – meeting interesting companies with dynamic entrepreneurs at their helms. As we’re investing for long-term growth – six or seven years – we must always consider: what opportunity is it that our investment is going to unlock, and why is that attractive?”

Do remember that past performance should not be seen as an indication of future performance. The value of investments can fall as well as rise and you may not get back what you put in.

Standing firm through Covid and Brexit

Stephen, who has a long career as an investor, founded BGF in 2011. Since then, the organisation has invested around £3.2 billion in over 450 companies.

He spoke about how BGF withstood previous crises.

“If I take 2016 as an example, Brexit dominated, there was a lot of uncertainty and many investors chose to sit on the sidelines,” he said.

“But we continued to do what we always do… we invested in strong and growing SMEs, and our investments in 2016 have proved to be a very successful vintage for us.”

He added: “We continued investing through Covid too. Nobody had any experience of running businesses through lockdowns. But our portfolio team and network of over 6,000 business experts were able to help the companies in our portfolio respond to the crisis and manage their cash through that difficult time.”

Life sciences and clean technology show particular promise

When asked about the biggest growth investment opportunities in the UK, in addition to the breadth and diversity of BGF’s overall portfolio approach, Stephen highlighted two emerging sectors. He spoke about life sciences – which include pharmaceuticals, neuroscience and biotechnology – and so-called ‘clean technology’.

“The future will be driven by innovation, science, companies that can solve problems,” he said. “That’s why the life sciences sector is looking very attractive right now.

“There is an increase in products and services coming out of that sector, and the UK has a competitive advantage. It has the academic weight of Oxford and Cambridge and a high level of expertise as demonstrated by the country’s response to Covid.”

As for clean technology, Stephen said that, while the UK had done a good job developing off-shore wind farms, there was still work to do investing in supply chains and broader areas such as energy storage and efficiency, creating opportunities for UK investors.

“This kind of knowledge-based economy really does play to the strengths of the UK,” he said.