£2.7bn invested in deals between SW SMEs and corporates

208 deals took place between South West SMEs and large organisations over the last four years, known to have exceeded £2.7bn, according to economic data from national law firm, Bond Dickinson.

Despite this billion pound figure, only 4% of all the UK’s collaborations between SMEs and corporates involved the South West. Taking into account the number of SMEs in each region last year*, the South West ranked as 11th out of 12 UK regions in terms of collaborations between SMEs and corporates. Only Wales was lower.

Across all regions, between 2013/14 and 2016/17, large organisations are known to have invested over £102bn in 5,447 deals with UK SMEs. This exceeds the £62bn corporates invested in UK research and development between 2013 and 2016**, and represents more than a seventh of the £683bn total UK business investment.

Based on analysis of four tax years of deal data, the findings are detailed in Close Encounters: The power of collaborative innovation. The report explores deals between large organisations and UK SMEs, including mergers and acquisitions, minority stake purchases and joint ventures from April 2013 to April 2017.

The research goes on to show that in the South West, the SMEs most likely to be involved in these corporate collaborations work in manufacturing, retail and technology. There is also a relatively high level of collaboration between public sector organisations and SMEs in the South West. The region ranks third in the number of public sector collaborations as a percentage of total deals.

Craig Moore, partner and Head of Bond Dickinson's Plymouth office, comments:

“Great things happen when startups collaborate with larger corporates or the public sector. Playing to each of their strengths enables swift and effective innovation, which ultimately supports jobs, growth and regional tax revenue.

“The low volume and value of collaborative deals in the South West could be explained in part by the high number of family-owned businesses in the region. Many of these business owners tend to have different exit strategies to other types of SMEs, and may not be interested in a corporate investment or acquisition.

“Having said that, more could certainly be done in the South West to strike up collaboration opportunities for more ambitious SMEs. Much of this is likely to be with technology driven businesses, as high-tech manufacturing SMEs from the South West increasingly tie into the supply chains of larger companies. We should also be looking at what is being done in other regions and sectors. For example, our research revealed that Financial Services is the most collaborative sector, with £6.1bn invested in deals between corporates and UK SMEs last year. This is an impressive figure and our region should try and adopt similar practices.

"Programmes like Innovate UK are already helping with this, as are clusters located in the South West, with Plymouth for example now ranked as having a higher proportion of manufacturing than any city south of Birmingham. Other opportunities include our great Universities, Science Parks, Oceansgate and the marine cluster. Results from the General Election could also have a positive impact with a number of parties already pledging their commitment to innovation in their manifestos."