Private Capital Offers a Route to Unlock £100bn for the UK Economy

The British economy would earn a £100 billion boost by the end of this Parliament if businesses across the country achieved productivity growth comparable to private capital-backed firms, according to new analysis carried out by Public First for the British Private Equity & Venture Capital Association (BVCA). 

New data from Public First estimates that private capital backed businesses increase their productivity by 1.1% per year more than the business population as a whole. If this productivity growth was realised across all private enterprises from 2025, the UK economy would be £100bn larger by the end of this Parliament (2029) and £250bn larger within a decade.  

Higher productivity is widely recognised as the key determinant of improving living standards, but the UK has underperformed similar economies in recent years. In 2024, the average German worker produced 9% more than a British worker, the average French worker produced 18% more, and the average American worker produced 40% more. Closing the productivity gap will be essential if Prime Minister Keir Starmer is to meet his stated mission to kickstart economic growth and raise living standards in every corner of the UK. If all businesses were as productive as the median private capital backed company, the situation trend would begin to reverse, and the UK would overtake Germany’s labour productivity levels by 2038. 

Private capital businesses operate an active ownership model which involves working with portfolio companies to improve management capability, operational efficiency and use of technology. The BVCA is calling on the Government to apply lessons of private capital’s active ownership model by providing support to SME leaders, removing barriers to productive investment, and using the British Business Bank and channelling pension fund investment to support future productivity champions.  

• Upskill SME leaders: Encourage small and medium-sized enterprise (SME) leaders to adopt behaviours and practices that drive productivity, whilst supporting programmes such as Help to Grow which boost management capabilities, and organisations like Be the Business, Small Business Britain and Business Leader which create networks of high performing business leaders who share the ambition to improve their operations 
• Remove investment barriers: Address obstacles preventing businesses from making productive investments, through the likes of planning reform, to ensure that access to the resources needed for growth are available. 
• Support future productivity champions: Government should work with the private capital industry to help drive pension investment into venture capital and growth equity, whilst expanding support for the British Business Bank and creating new pension vehicles.  
   

Michael Moore, Chief Executive of the British Private Equity and Venture Capital Association (BVCA), said: 

“The UK needs to address the long-term weak productivity growth if the Government is to meet its mission of kickstarting economic growth. By closing the gap between private capital backed businesses and other businesses, the UK could unlock a productivity premium of an additional £100 billion for the economy by the end of this Parliament.  

“Private equity and venture capital demonstrate how targeted investment drives innovation and efficiency; these are lessons that could be taken on board by policy makers and business community as a whole to drive forward wider growth.” 

Notes to Editors

The full list of the BVCA’s recommendations are listed below.  

1. Help SMEs become as productive as private capital backed peers  

Government should use the example of how private capital businesses work with their portfolio companies to encourage behaviours and practices that drive productivity. Government should:  

• Use its upcoming spending review to provide long term funding of the Help to Grow Management programme which helps develop SME leaders’ skills through a combination of training and business mentoring  
• Update the curriculum of Help to Grow Management, learning from how private capital businesses encourage digitisation and use of new technologies such as AI to increase business performance.  
• Continue to support the work of organisations like Be the Business, Small Business Britain and Enterprise Nation which work closely with leaders in the private sector identify and share best practice of high performing businesses through their specialist networks, programmes and campaigns.  
   

2. Break down barriers to productive investment  

Government should attract more private capital investment to the UK, which supports higher productivity through its active ownership model. It can achieve this by overcoming barriers set out in the BVCA and Public First’s Investment Commission report, including:  

• Reform the planning system to minimise delays for business properties as well as housing.  
• 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.  
   

3. Back future productivity champions in every nation and region of the UK 

Increasing investment from UK pension funds into UK private capital is vital to both driving economic growth and improving the retirement prospects of UK savers. Government should work with the private capital industry to help drive pension investment into venture capital and growth equity through measures, including: 

• Accelerating the transfer of assets to pools. The Local Government Pension Scheme (LGPS) in England and Wales has a combined value of around £350bn, placing it amongst the largest investors in the world. Asset owners of that size would usually be expected to have around 20-30% invested in private markets, however the LGPS has 6% in private equity. 
• Moving quickly to establish announced pension ‘megafunds’ that bring sufficient scale to invest in high higher growth assets like private capital funds which drive investment into highly productive UK businesses whilst delivering strong-returns for pension savers. 
• Ensuring that all the pools establish an FCA-regulated structure. This would enable the creation of a centre of investment expertise for partner funds to gain access to range of local, regional and global private capital opportunities. 
• Expanding support for the British Business Bank, with a broader remit to cover growth equity funds and new vehicles for pensions investment. 
• Developing new Government-backed vehicles for investment in strategically important sectors, including a ‘fund of funds’ vehicle to get local government pensions investing in growth. 
   

Public First Methodology 

• Public First reviewed a range of literature on the productivity impacts of venture capital and private equity. A median figure for productivity growth impacts, from these studies, was used to examine the implications of all UK businesses benefiting from a similar “productivity growth boost”.  
• ONS business population estimates were used to estimate private sector gross value added (GVA) and GVA per worker. We used BVCA data on the number of VC-backed firms and number employed in BVCA-backed firms, to produce an estimate of private sector GVA excluding already VC-backed companies which already benefit from the productivity growth premium. 
• Office for Budget Responsibility forecasts were used to produce baseline projections for economic growth. This was than contrasted with a counterfactual in which productivity growth is higher an in line with the premium seen in the literature from VC backing.  
• IMF forecasts and historical data were used for international comparisons. International data is expressed in purchasing power parity-adjusted dollars, which account for differences in purchasing power across countries. 
   

For further information, please contact:   

BVCA Press Office  
Email: [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 over 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 250 private equity and venture capital firms, 100 institutional investors and over 200 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.