Adding Value, Delivering Growth - BVCA and Public First's Investment Commission Report

Growth is the biggest challenge facing the UK economy, and the Government has made it clear that private investment will be important to setting a new trajectory. The Investment Commission, established by the BVCA and Public First, sets out exactly what it will take for the Government to attract more of that capital to stay here in the UK.
 

How private capital boosts business productivity

Private capital is active engaged investment in growing businesses over many years, to build the value of that business and get a return for investors. That means that it is a uniquely powerful driver of productivity at the firms we back, with the academic evidence showing a positive impact continuing for years after the investment.

The report outlines how private capital adds value to the businesses that it backs by increasing productivity. It sets out 10 specific kinds of intervention and support which PE and VC firms routinely provide to their portfolio companies.

• Putting in place a strategic plan, so that management understands what the company’s goals are and how it intends to achieve them, to support decision-making and enable performance to be properly measured against meaningful benchmarks.
• Providing management and leadership support, to help managers lead their businesses through the changes required for a company to grow.
• Introducing new ways of measuring productivity so that portfolio companies can use data to understand where they are performing well and where there are areas for improvement, and so that they are properly accountable to their investors.
• Giving portfolio companies access to specialist networks, in some cases through the appointment of an advisory board, to provide expertise and advice which it would otherwise be difficult for a single company to reach.
• Growing a company through strategic M&A, enabling more efficient supply chains and an expanded customer base, drawing on expertise which is more likely to exist within a PE or VC firm than within a single often smaller or medium sized company.
• Encouraging and facilitating internationalisation, helping portfolio companies to identify and access export opportunities and expand their customer base, as well as to source talent from a much wider pool.
• Investing in tech enhancement, drawing on expertise within the PE or VC firm to support portfolio companies to use technology, from accounting software to CRM systems to new ways of using AI, to drive productivity gains.
• Providing access to capital and financial investment in a business to support its growth.
• Enabling portfolio companies to draw on commercial support and expertise from the PE or VC firm on specialist areas such as PR, branding and pricing, which they would find it difficult to access elsewhere.
• Helping portfolio companies demonstrate their compliance with regulatory requirements and improve their ESG performance.

Unlocking greater investment from private capital to boost UK growth

The Commission brought together a range of experts representing investors, business leaders, academics, think tanks and business groups, to recommend changes that would result in a greater share of dry powder being invested in the UK.

Secondly, the Investment Commission held roundtable discussions on investment in the nations and regions of the UK, the tech sector, clean energy and the green transition, to tailor a list of recommendations that the Government should focus on to increase the UK’s attractiveness as an investment destination.

Key recommendations include:

• Reform the planning system, making it easier for businesses to scale, ensuring that greenfield status is not a block on building new facilities and supporting infrastructure.
• Build on the announcement of the new Regulatory Innovation Office and conduct a cross-cutting review of regulation in innovative and emerging spaces to enable investor confidence in the regulatory framework of rapidly changing technological spaces and avoid holding back innovation and growth.
• Open up the Apprenticeship Levy to focus on non-apprenticeship training programmes and STEM skills, building upon the governments new body of Skills England, to broaden the range of ways to contribute to skills development and to create the skilled domestic workforce needed for the economy of the future.
• Where there is a skills shortage, British visas for top global talent should be simplified with clear criterion for recruiting talent into portfolio companies that recognise the role of venture capital and growth equity. This gives investors the assurance that top quality individuals are available to help grow and scale businesses to see a better return on investment.