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Private capital: rising to the challenges of turbulent times

Publish Date 13 Jul 2023
Categories Industry Activity
2022 was a year of turbulence, from the devastating war in Ukraine, to supply chain challenges and rising inflation around the world. The global economic outlook has become more uncertain, and the climate emergency is ever more pressing. Navigating a path to sustainable economic growth is the main priority and private capital is a key part of the solution.

In this report we use the data from the 2022 Investment Activity Survey, along with a series of case studies, to tell the story of private capital: what investors do, where they do it, and how it benefits our society.

Invested for the long-term

Private capital investment is inherently long-term. Investors back businesses, whether startups or more mature companies, with the aim of helping management teams build stronger, more resilient operations. Our data showsthat the average investment period is five years, in contrast to 5.5 months1 in public markets. And moreover, over half of UK businesses backed by private capital firms in 2022 were receiving their second or subsequent investment, demonstrating an ongoing commitment and enabling these businesses to make acquisitions, invest in new factories or expand overseas.

Invested across the UK

Despite the tough economic conditions in 2022, private capital invested £27.5bn into UK businesses, well above the 2020 and 2019 figures, although a drop from the record breaking £36.1bn invested in 2021. Nearly 1,600 UK companies received investment, of which 9 in 10 were small and medium-sized businesses.

Over 12,000 UK businesses are backed by private equity and venture capital, directly supporting almost 2.2 million jobs and representing 6% of UK GDP. This investment was spread across all nations and regions of the UK. Our data shows that 55% of companies receiving investment in 2022 were headquartered outside of London.

Invested in innovation

Our activity survey shows that private capital invests across all sectors of the economy, with tech focused businesses attracting 47% of the total amount invested (£12.9bn). The long term view taken by private capital investors provides the time and space to research, develop and commercialise new products and services. Investors are alive to the need to build businesses fit for the future, whether that is decarbonising the business as in the case of the housebuilder Marley or reducing plastic consumption like Tangle Teaser. Environmental, Social and Governance (ESG) considerations are fast becoming business as usual.

Invested in a better future

UK private capital funds raised a record £70.2bn in 2022, bringing the stock of available capital managed from the UK to £145bn. This £145bn, known in the industry as ‘dry powder’, is expected to be invested over the next 3-5 years to help great businesses innovate and grow. The private capital industry is well positioned to drive the transformation of our economy in the years to come and it is therefore crucial for the UK to sustain its global competitive edge by maintaining a healthy business environment and retaining talent.

A companion publication “Report on Investment Activity 2022: Statistics from our annual member survey” provides the full aggregated survey results and an excel extract of the aggregated results can also be downloaded from our website here.

A podcast examining the investment activity of the industry in 2022 in detail, recorded with BVCA Chief Executive Michael Moore, Director of External Affairs, Karim Palant and Head of Research, Suzi Gillespie, can be listened to here.

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