Risk-Taking Has a Postcode: What UK SME Investment Data Tells Us About Regional Risk Attitudes

If you ask a small business owner in Southern England and one in Northern England how they feel about taking a risk to grow, you’ll likely get different answers — and new research shows that gap is real, measurable, and matters for policy.

A study by Sylvia Gottschalk, Quang Nguyen and Robyn Owen (Middlesex University Business School), drawing on a 2023 survey of UK SMEs run by the Department for Business and Trade and the Bank of England, digs into how risk attitudes shape investment decisions — and how sharply those attitudes vary by region.

A nation divided on risk

Two-thirds of UK SMEs say they’re willing to take risks to grow their business. But that headline figure hides a clear regional pattern. In Southern England, 68% of SMEs describe themselves as risk-taking, compared with 66% in the Midlands and South West and in Northern England, and 63% in the Devolved Nations. The gap is statistically significant.

Southern England stands out in another way too: it’s the only region where risk-takers and risk-averse firms are roughly evenly split (49% versus 51%). Everywhere else, risk-averse responses exceed 56%.

External assessments of SME risk — the ratings finance providers actually assign businesses — tell a consistent story. Southern England firms are statistically more likely to be rated “above average” risk, while the Devolved Nations have proportionally more “minimal risk” businesses and Northern England more in the “low risk” band.

Why firms take risks — and when they don’t

The more interesting finding is that risk appetite isn’t fixed — it shifts depending on why a firm is investing. Businesses investing to boost productivity are consistently more risk-tolerant across every region, and this effect is especially strong in the Midlands and Northern England — regions that are otherwise more risk-averse overall. The same pattern holds, to a slightly lesser degree, for investment aimed simply at keeping the business running.

Environmentally motivated investment is the exception. Firms investing in climate adaptation or responding to rising energy costs show markedly lower risk tolerance, particularly in Southern England, where non-investors in this category are the most risk-averse group in the data. This suggests green investment is still being treated as a defensive, compliance-driven cost rather than a growth opportunity.

What this means for policy

These patterns carry several practical implications for policymakers and business-support bodies.

First, roughly half of SMEs see no investment opportunity at all over a three-year horizon — a sign of latent, unmet demand, especially given that almost every firm that does invest reports a positive outcome. Closing that gap should be a priority.

Second, the fact that risk-averse regions like the Midlands and Northern England still show real appetite for risk when investment is framed around productivity or business survival is a genuine policy opening. Targeted support that speaks specifically to these motivations — rather than generic risk-taking or growth messaging — is likely to land better than a one-size-fits-all approach.

Third, green investment needs reframing. Right now it’s mainly undertaken by firms that are already risk-tolerant, and most SMEs don’t see a connection between sustainability spending and business performance. Yet the data show SMEs that invest in climate adaptation tend to report higher profitability. Making that link visible — through case studies, demonstrator projects, or targeted communication — could shift environmental investment from a reluctant cost to a recognised growth lever.

Finally, access to finance still matters: applying for commercial debt or government grants is associated with a significantly higher chance that an identified investment opportunity is actually implemented. Continued investment in financial literacy and “investment readiness” support — particularly for risk-averse SMEs outside the South — remains a sound policy bet.

The takeaway is simple: regional risk attitudes aren’t a fixed cultural trait to work around — they’re a moving target shaped by what the investment is for. Policy that recognises this nuance stands a far better chance of unlocking the investment that’s currently sitting on the sidelines.

Based on: Gottschalk, S., Nguyen, Q. & Owen, R. (2025), “Entrepreneurial risk appetite, access to finance and SME investment: A regional perspective,” Middlesex University Business School.