Private capital: Building a better economy for the future
The private equity and venture capital (private capital) industry continued to invest in businesses and people in 2023, despite another difficult year for the UK and global economy. The numbers in this report reflect that economic turbulence.
Thus far in 2024, the UK has held a General Election, and the new Labour Government has taken office with an explicit aim of achieving the highest sustained economic growth in the G7. In their first few weeks in office, the Government has announced a Pensions Review, published a call for evidence on the tax treatment of carried interest, established a National Wealth Fund, and confirmed plans to hold a Global Investment Summit in October.
Attracting capital and investment
The key question is how best to achieve this economic growth. Increased private capital investment, both in the short-term and sustainably over the long-term, will be key, with recent research demonstrating the uplift in productivity in firms following private equity investment.
The UK private equity and venture capital market remained strong in 2023, with UK-managed funds raising £60bn in 2023 to be invested globally, representing over half of the total private capital raised in Europe.
As we see in this report, private capital attracts investment from across the world, deploying it as long-term investments that back British businesses of all sizes and types. This generates jobs and supports the UK as a thriving business and investment hub that helps build a better economy for the future.
However, this data also highlights areas where the economy could better harness the benefits of private capital investment. Pension funds represented 28% of total capital raised for UK-managed funds, yet only 3% of this pension capital came from UK pension funds. There remains more to do to ensure UK savers and investors can benefit from the returns that private capital can generate.
Benefitting businesses across the country
Economic growth is a key part of the solution to the ongoing pressures on the cost of living in the UK. This means that the benefits of growth must be felt by people and businesses in every nation and region of the UK.
As the data in this report shows, 80% of jobs backed by private capital in 2023 were outside London with ICT (information and communications technology), biotech & healthcare and business products and services sectors attracting the highest number of company investments.
The data published here also demonstrates the different types of investment that businesses across the UK’s nations and regions benefit from. London and East of England attracted a high proportion of venture SME investment while other nations and regions were proportionally more attractive to investments into established businesses. This shows that, whilst private equity and venture capital are investing in the businesses of the future, they are also working with our established high street businesses and smaller firms to enable them to succeed in a changing economy.
A strategy for generating growth across the nations and regions must address these variations to ensure that entrepreneurs and those with good ideas are able to access the means to turn those ideas into successful businesses.
In this report we use the data from our Report on Investment Activity 2023, along with a range of case studies, to set out what private capital investment means for businesses and wider society, where capital is invested in the UK, and how the benefits of this investment are realised.
