Circular economy deals set to spike in 2022, says BDO

With more than £1.5bn of capital deployed into UK circular economy businesses over the past four years, consultancy BDO expects this trend to accelerate in 2022 on the back of strong H1 activity.

A report recently released by BDO shows that more than £1.5bn of capital has been deployed into UK circular economy since 2018, across a total of 296 investments covering both equity and debt. Annual deal volumes grew by two thirds from 2020 to 2021 alone and the average disclosed cheque size increased from £7m in 2018 to £9.3m last year. Venture capital accounted for 50% of 2021 transactions, followed by mid-market private equity leading on 22% of investments, and debt funding making up 15% of deals.

BDO’s research also found that a third of circular economy deals have been done in the manufacturing and industrials sector; another third have been in food and drink; and 22% have been in the retail, leisure and consumer markets. Growth capital investor BGF has been the most active UK circular economy investor over the past four years with 12 deals, according to BDO. Meanwhile, Circularity Capital stood out as the leading specialist circular economy investor with six investments over the same period.

“There is growing recognition from investors that circular economy principles can deliver both environmental and economic benefits,” said Todd Mills, assistant director at BDO. “This is reflected in the sharp increase in circular economy investments in 2021, with entrepreneurs and investors partnering to deliver innovative business models that reduce waste and inefficiencies. With levels of available private equity capital in the UK at an all-time high, more and more investors are turning to the circular economy and we expect 2022 to be another record year.”