UK Venture Capital Trusts Buck the Trend

The UK Venture Capital Trust (VCT) landscape seems to be showing a positive trend despite broader challenges in the venture capital funding arena. According to research conducted by the Venture Capital Trust Association, which represents major VCT managers in the UK, investments by VCTs increased by 8% in 2022. This is noteworthy because overall venture capital funding in the UK decreased by 23% during the same period.

Some of the key observations from the research are:

Investment Growth: VCTs provided a total of £664 million across 345 investments in 2022. This represents an 8% increase compared to the previous year.

VCT Description: VCTs are investment companies that are listed on stock exchanges. They specialise in providing investments to unlisted (private) companies and receive tax relief as an incentive for supporting these companies.

Consistent Capital Secured: This marks the second consecutive year that VCTs have exceeded £1 billion in secured capital. This suggests ongoing investor interest and confidence in this investment approach.

Sales Growth for Invested Firms: Companies that received investment from VCTs experienced a substantial growth in sales. Sales for these firms increased by 54% compared to the previous year.

Export Sales Boost: Firms that had the support of VCT investments also showed increased export sales. Export sales for these companies amounted to £3.7 billion in the surveyed year, up from £2.9 billion in the previous year.

Role of VCTs: Will Fraser-Allen, the chair of the Venture Capital Trust Association, emphasised the importance of VCTs in supporting innovative young businesses. These businesses contribute to economic growth by investing in emerging technologies like artificial intelligence.

Government Policy: The UK government’s policy of encouraging investment in fast-growing companies is seen as beneficial to the growth of these companies and the overall economy. VCTs are seen as playing a vital role in this investment ecosystem.

Challenges in Tech Startup Funding: despite the positive VCT trends, challenging economic conditions have led to a decline in tech startup funding. This trend continued into the first half of 2023.

VCTs in the UK appear to be thriving despite a broader decline in venture capital funding. These investment vehicles are contributing to the growth of innovative businesses with the hope that it will benefit future UK growth in the technologies of the future.

(Source: UKTN / VCTA)

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