‘Butterfly effect: the transformational potential of VCT investment’
The Association of Investment Companies (AIC) has welcomed the Government’s new initiative announced today, the Future Fund. This fund will provide loans to the UK’s innovative companies which are suffering financial difficulties due to the coronavirus outbreak. The Government’s loans will range between £125,000 and £5 million and will be matched by private sector money from venture capital investors.
Ian Sayers, Chief Executive of the AIC, said: “The Government’s plan to provide loans to some of the UK’s most innovative companies is really encouraging. Coronavirus has had a devastating impact on the economy and it’s particularly important that these high-growth, dynamic companies survive, grow and thrive. As ever the devil is in the detail, and we look forward to engaging with the Government to understand more about the loan scheme when further information is available.
“VCTs support these types of innovative companies with high potential for growth in sectors as diverse as healthcare, retail and green technology. VCTs meet the funding gap for these companies but also provide wider expertise and support to help them grow. It is vital that the UK provides a fertile environment for these dynamic companies which have the potential to grow into tomorrow’s household names.”
The AIC report
The AIC recently issued the report, ‘Butterfly effect: The transformational potential of VCT investment’. It surveys investment by VCTs since November 2017 when new rules were introduced directing the tax-advantaged vehicles towards higher-risk investments.
Their report finds that VCTs have invested in over 181 businesses with high potential for growth since November 2017. VCTs are able to invest in businesses with up to 250 employees: however, these businesses employ an average of 38 people each and nearly half of them (45%) have fewer than 25 employees.
These dynamic small businesses generated £395m of sales in 2019 of which £126m were exports. However, no company in the survey reported sales of more than £5m for the last financial year.
Knowledge-intensive companies made up 28% of the 181 businesses in the survey, and 37% of VCT investment was directed outside London and the South-East. The report contains 25 case studies of companies that have received investment since the 2017 rule changes.