New Government could unlock £178bn of private capital investment

A new report from the British Private Equity and Venture Capital Association (BVCA) and Public First, has made a series of recommendations for government that could unlock billions in additional investment by the private capital industry into UK businesses.

UK based private capital specialists have £178 billion of funds to invest, which they expect to deploy in the next three to five years. Historically, around half of the funds managed in the UK, known in the industry as ‘dry powder’, are put to work here.

The new Government has made kickstarting economic growth one of its central missions. In anticipation of that, the BVCA and Public First 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.

To support its work, 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. The BVCA and Public First also carried out a survey of senior investment professionals. This resulted in the Commission recommending that the new Government focuses on several areas to increase the UK’s attractiveness as an investment destination.

• Reform the planning system to enable scale. A third (33%) of investment professionals surveyed say planning reform would make it easier for them to invest in UK businesses. The Commission recommends that greenfield status should not be a block on building new facilities and supporting infrastructure. Forthcoming changes to Green Belt designation should not be restricted to housing development but must ensure that job-creating sites can be built where they are needed where there is insufficient suitable brownfield land. Whilst additional planning officers should be available to process applications in line with business timelines, which will require an increase to the 300 additional officers already pledged by the government.


• Enable innovation through a program of agile regulations. Nine in 10 (91%) investors surveyed say a faster and more agile regulatory system would make it easier for them to invest in UK businesses. The Government should 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.


• Reduce policy uncertainty by introducing an ‘Industrial Strategy’ and making fewer changes to fiscal policy. Over four in 10 (42%) investment professionals surveyed say they have decided not to invest in a UK business because of regulatory uncertainty. The Commission calls for the Government’s industrial strategy to set out overarching sectoral policy frameworks and relevant timeframes, to give investors clarity on the strategic direction the nation is heading. It also calls for fewer Budgets and fiscal events, and commit to change taxes as little as possible, to give investors certainty that their investments will pay off.


• Upskill the workforce and attract global talent. Eight in ten (79%) investors surveyed say UK businesses they invest in have experienced problems as a result of skills shortages. The Commission has called for the Apprenticeship Levy to be opened up 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.


• Make regulation less complex to compete with global competitors and invest in R&D. Over two thirds of (70%) of investors surveyed say UK businesses they invest in have experienced problems because of regulatory uncertainty. In light of competition from the US’ Inflation Reduction Act and the EU’s Green Deal, the Investment Commission has called for UK regulations to be simplified. This includes streamlining and expanding support for the British Business Bank as well as the National Security Strategic Investment Fund. Whilst, the Government should develop a comprehensive R&D strategy, including R&D tax relief, that incentivises genuine innovation in the UK. This would expand investment opportunities for private capital and make doing business here more attractive to investors.


• Facilitate growth through efficient infrastructure. Over four in 10 (42%) of investors say they have decided not to invest in a UK business because of a lack of public infrastructure such as transport or grid connections. The Commission recommends that stronger powers be given to the National Infrastructure Commission to give a clear roadmap around major projects, opening new possibilities for investment and to facilitate the transfer of interregional skills.

This report launches just ahead of the governments Global Investment Summit, which will convene international investors, and provide an important opportunity for private capital to lead the way as a partner for growth by facilitating additional economic investment opportunities in the UK.

Commenting, BVCA chief executive Michael Moore said:

"The private capital industry is already a 'partner for growth' in the economy, investing billions in the UK economy and ready to do more. To do so, it needs the new government to create an environment that encourages investors to choose the UK.

“There is £178billion in UK managed funds that could be deployed here, or elsewhere. The Investment Commission has outlined what it will take to make the UK the destination of choice for investors."

Notes to Editors

For further information or a copy of the report, please contact: BVCA Press Office
[email protected]

Background

About the British Private Equity & Venture Capital Association

The British Private Equity & Venture Capital Association (BVCA) is the voice of private capital in the UK.

We have been advocating for the UK’s private equity and venture capital industry for 40 years, helping it to uphold its vision and achieve its goals.

We actively represent this diverse community of long-term investors, enabling them to speak with one clear and consistent voice to society, including the Government, media and MPs.

We connect institutional investors, fund managers, companies, advisers and service providers together, with our membership currently comprising more than 600 businesses from across the private capital ecosystem.

This includes more than 260 private equity and venture capital firms, 100 institutional investors and over 190 professional services firms.

The BVCA supports its members to help companies grow and achieve their long-term ambitions, creating value for the country, both economically and socially.

From creating medicines to protect us against COVID-19, to backing innovative companies in their quest to find solutions to our low-carbon future, private capital also plays a critical role in addressing the future challenges we face as a society.

Together we are invested in a better future.

About the Investment Commission

The BVCA and Public First carried out an online survey of senior investment professionals within the BVCA membership between 15th-22nd January 2024, receiving responses from over 60 senior decision makers in over 50 investment firms. The BVCA and Public First also held expert roundtable discussions with business leaders, academics, investors, think tanks and business groups. The focus was on three specific themes: green transition and clean energy, the UK tech sector, and investment in the nations and regions of the UK. All roundtables were conducted under the Chatham House Rule.