Private capital investment tops pre-pandemic levels as more businesses turn to private equity and venture capital
- Over £27bn of PE and VC was invested in UK businesses last year, 22 per cent higher than 2019
- UK pension funds invested only a fraction in homegrown business, showcasing the need for pension reform that focuses on stable returns for savers
British businesses are continuing to seek out private capital to grow, with the total amount invested in UK companies by private equity and venture capital beating pre-pandemic levels, according to a new report published today.
Research by the British Private Equity and Venture Capital Association (BVCA) - which looks at the activity of the UK private equity and venture capital industry - found that the total amount invested in UK businesses in 2022 was £27.5bn – a 22 per cent increase compared to the £22.5bn invested in 2019, before the pandemic.
Attracting Capital Globally
Over £70bn was raised from across the world in 2022 by UK managed funds, with a significant amount coming from North America (£20.3bn).
Pension funds from across the world are a substantial source of capital for UK fund managers, investing £21bn in 2022 alone. In contrast, UK pension funds have only invested £2.8bn out of this total, suggesting there is still work to be done to open up the benefits of investment in unlisted equities.
Of the 1,578 businesses which received funding, nine in ten were small or medium-sized, showing the importance of private capital to the UK’s entrepreneurs and start-ups.
Over half of UK businesses backed by private capital firms in 2022 received second or subsequent investment, demonstrating an ongoing commitment to the success of these businesses.
The data highlights that investments by private capital firms tend to be long-term, with an average investment period of five years in contrast to 5.5 months in public markets1.
The research also reveals the scale of the opportunity for further growth; UK managed private capital funds have commitments amounting to £145bn of capital that is expected to be invested over the next 3- 5 years. Over recent years around 50% of the capital invested by these UK managed funds has been invested into UK companies.
Technology Sector
Although, private capital investment lost some of its momentum compared to the record-breaking 2021, in which UK businesses received £36.1bn, the tech sector bucked the trend with a 15 per cent increase in investment, from £11.2bn to nearly £13bn.
Across IT, communications technology, fintech and biotech, 772 tech companies at all stages of their growth received investment. In venture capital specifically, £2.3bn supported nearly 570 businesses.
However, was a clear gap in UK scale-up funding, with the greatest share of investment going to early-stage there and start-ups outfits.
Investment Nationwide
Regionally, the Midlands witnessed the greatest year-on year uptick in investment, increasing from £2.8 billion in 2021 to £5.3 billion in 2022. Most of this capital was directed into the IT and Biotech sectors.
Establishing a UK office is one of the decisive factors influencing regional investment in the UK - 60 per cent of companies which received investment led by an UK office in 2022 were located outside London. However, this was the case for only 30 per cent of companies receiving investment led from outside the UK.
The report’s publication follows the Chancellor’s Mansion House speech, in which Jeremy Hunt announced a series of reforms to marshal the UK’s pension savings into private equity and venture capital, providing a good return for savers and investors.
Michael Moore, Chief Executive of the BVCA, said:
“Despite the turbulent economic headwinds, the story of private capital investment in 2022 demonstrates the industry’s astonishing ability to grow British businesses, particularly outside of London.
“Although investment levels are above what they were before the pandemic - signalling the global appeal of our burgeoning tech sectors, for example - there remain bumps in the road. The UK faces a particular challenge with later stage funding, and UK pension funds invested only a fraction of what they could in homegrown businesses. The Chancellor’s Mansion House reforms are a step in the right direction, but we must ensure that the needs of both savers and investors are considered. We will continue to work with policymakers to create the best possible environment for both.”
The new research published today offers further evidence of the value of private equity and venture capital to the UK economy and follows an EY report published earlier this year which found that the industry backed over 2 million jobs in the UK.
Media contacts
Karen Keany, BVCA: [email protected]
Notes to Editors
About the British Private Equity & Venture Capital Association
The BVCA, as the representative body for private equity and venture capital, connects institutional investors, fund managers, companies, advisers and service providers together, with our membership currently comprising more than 700 businesses from across the private capital ecosystem. This includes more than 325 PE and VC firms, 100 institutional investors and 220 professional services firms.
Private capital drives growth – providing the funding, expertise and long-term view that enables companies to innovate and flourish. Our mission is to advocate the transformative nature of the private equity and venture capital community.
