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Venture Capital's Contribution To UK PLC Charted

Tuesday, May 28, 2013

A new study by AIC, a UK trade body for closed-ended investment companies, has highlighted the contribution of venture capital trusts (VCTs) to funding for entrepreneurial and innovative activity in Britain.

The AIC's "Investing for the Future" report shows that venture capital investment in Small- and Medium-sized Enterprises (SMEs) has remained strong throughout the financial crisis.

VCT managers provided details of 78 first-time investments in 2012 totalling GBP145m (USD219m), with the size of a first time investment averaging GBP1.81m. Amongst the respondents, a further GBP211m of follow-on investment went to 160 companies in 2012.

The AIC's study involved information from 399 SMEs, representing approximately 40 percent of the VCT sector. The report's salient findings included:

  • The average investment for a VCT is held for six years, though some companies remain in the portfolio for ten years or more.
  • Investee companies created on average 52 new jobs following investment.
  • Investee companies created on average GBP10.8m of new turnover following investment;
  • 78 percent of investee companies had a representative of the VCT fund management group team on their board, illustrating that it is the combination of investment and business experience that provides sustainable benefits to the economy;
  • 41 percent of investee companies are engaged in export activity;
  • 31 percent of investee companies reported an investment in research and development  in the last 12 months, with an average spend of just over GBP1m per company.

Ian Sayers, Director General, Association of Investment Companies said: "This research shows the Government’s support for VCTs has been well rewarded. VCTs are bridging the finance gap and supporting job creation and innovation in what remains a challenging economic environment. The combination of investment and business experience offered by VCTs provides real and sustainable benefits to the wider UK economy."