The geography of business angel investments in the UK: Does local bias (still) matter?

Business angels (BAs) - high net worth individuals who provide informal risk capital to firms - are
seen as important providers of entrepreneurial finance. Theory and conventional wisdom suggest
that the need for face-to-face interaction will ensure angels will have a strong predilection for
local investments. We empirically test this assumption using a large representative survey of UK
BAs. Our results show local bias is less common than previously thought with only one quarter of
total investments made locally. However, we also show pronounced regional disparities, with
investment activity dominated by BAs in London and Southern England. In these locations there is
a stronger propensity for localised investment patterns mediated by the ‘thick’ nature of the
informal risk capital market. Together these trends further reinforce and exacerbate the disparities
evident in the UK’s financial system. The findings make an important contribution to the
literature and public policy debates on the uneven nature of financial markets for sources of
entrepreneurial finance.

Attribution 4.0 International