Firms supported by British venture capital will have a critical role in addressing some of the most important targets set for the country by the government. They can participate in the UK’s ambition to be a science and tech superpower, in the strategy to advance regions up and down the country, and of course in the race to achieve carbon net zero.
Recent reports suggesting that the UK made up an impressive over 30 per cent of all European VC investment in the first months of this year are cause for celebration.
But rising interest rates mean that the industry is also now facing a potentially more difficult environment – both for its investments and its sources of funding. UK venture capital could face a difficult few years ahead, and no one wants recent successes to have been a false dawn.
That’s why over the coming months, the House of Commons Treasury Committee will be taking an in-depth look at the UK’s venture capital sector.
We want to turn the spotlight on how venture capital works in the UK. We’re asking how easy it is for founders of growing businesses to access the domestic funding that enables a small firm to grow into an international success story.
We also want to look at the options for change within the current VC tax incentive schemes.
HMRC forecasts for 2021-22 suggest that the Enterprise Investment Scheme would cost the Exchequer over £500 million. On top of this, two Venture Capital Trust relief schemes combined potentially cost over £250 million. The Committee will want to make sure the UK is getting true value for money.
With this in mind, we are currently seeking written evidence on the venture capital market and later this year, we will hold public sessions to hear from those with experience in the sector.
We’ll be looking at how well the market is working and at the current effectiveness of regulation, as well as scrutinising the merits of various relevant policy proposals.
Our inquiry is seeking views on potential ways to strengthen the industry, whether that is by opening up pension funds as new pools of capital for VC investment, or allowing greater accessibility by the retail market.
We’re keen to hear new ideas as well as the positives and negatives of current approaches. We have important questions to answer: How can we best nurture home-grown skills and attract the best talent from abroad? How well do start-ups and the established industry currently work together?
On all these issues and more, we want our inquiry to capture a wide range of opinion from both within and outside the sector. But we would also very much like to understand what can be learnt from international best practice.
As MPs on the Committee, we work across party lines to hold the government to account. We’ll hold evidence sessions with industry experts, analyse the written evidence we receive and consider whether there are recommendations we can make to the government to enhance the industry.
We want to guarantee there is no stone left unturned in ensuring the best environment possible for investors to back new or growing UK firms, with a healthy and successful venture capital market providing growth and new employment for the UK economy.