It was Samuel Johnston who said ‘when a man is tired of London, he is tired of life’.
However we in Northern Ireland are not so keen on the good doctor and inventor of the first dictionary because he also said of our own Giant’s Causeway, ‘worth seeing yes, but not worth going to see’.
However if he was around today and of course an investor in new technology, he might be tempted to say ‘if a man is tired of investing in London, he is tired of life’. Because for the first time, more than half of all equity investments were made in London.
Indeed, if you look at London and the South East in 2016, then this area grabbed 65% of all equity investment by value. Or if measured by number of deals it’s still 57%.
And this is no flash in the pan. Over the five years to 2016, London took 45% of all investment. So the latest figures, depressing as they are, simply build on this trend.
Recent figures from the British Business Bank show that Northern Ireland took 1.2% of equity investment deals. Yet, we have a good 2.2% of the UK’s High Growth Firm population. So the demand is there, but not the supply of funds.
And buried in the figures there is another depressing indicator. While in London only 8% of equity rounds had some level of public sector backing, once you go north, this rises to over 70%. A clear sign that well-meaning public policy is trying to redress an imbalance.
For Northern Ireland most informed commentators would agree it’s likely to be over 70%.
The further you get out from London, the harder it gets.
However the picture is not that simple. While figures are harder to come by, if you trawl the dodgy wine bars of London, and speak to the fund managers another side emerges. Let me, in the spirit of full disclosure, say now that this is what I do - for purely professional reasons as part of my job let me add ….
Firstly London valuations are much higher. There is too much money chasing too few deals, so up goes the price. And this is especially true at the earliest stages where Seed EIS tax is always in danger of distorting the picture. This is so generous, where investors can be risking as little of 25 Pence in the Pound, that there can be active competition to find the companies.
This has created a world where busy city-types say to their advisors ‘get me some SEIS deals’ and almost disregard the sectors and quality in which their money is to go. This isn’t a basis on which to make good investment decisions but it is a recipe to push up deal prices.
However London’s problem is a great opportunity for the regions.
We don’t have London’s high costs. Technical salaries are not nearly as high, it is actually possible to hire good talent and, certainly in NI, key employees are much more loyal. So bed-hoping, in the job sense, is a lot less prevalent.
Now London is always going to be the major centre of investment in Britain – even the madness of Brexit is not going to change that. But the shrinking of distances for investors by the Internet – think crowdfunding as but one simple example, but there are many – will make it easier for capital to flow outside London.
And the uneven playing field of valuations, talent and opportunities will take advantage and more deals will run downhill to the regions.
Returning to Doctor Johnston, as I’ve said, we may dislike him for what he said about our World Heritage Site star tourist attraction. But the Scots have even more reason to dislike him for this double barb:
“The noblest prospect which a Scotchman ever sees, is the high road that leads him to England!”
Hopefully our financial road will be in the other direction.