Investing in a better economy

As of the end of 2024, UK-based private capital funds have £190bn of capital available to invest, which is expected to be deployed over the next three to five years.

This BVCA estimate includes new data from over 2,000 venture capital, growth equity and private equity funds. Historically, around half of the funds managed in the UK, known in the industry as ‘dry powder’, are deployed here.

The industry currently backs 13,000 businesses across the UK, supporting 2.5 million jobs, two thirds (69%) of which are located outside of London. In 2024, the total amount invested by private equity and venture capital in UK businesses was £29.4bn, which was itself a 44 per cent increase on the amount invested in 2023.

The report makes a series of recommendations about how to increase the amount of capital invested in high potential sectors, including those identified in the Government’s 10-year industrial strategy.

• In life sciences – UK biotech firms raised £3.5 billion in capital, with venture funding accounting for over £2 billion in 2024 alone. Yet, while early-stage activity remains strong, the market thins significantly at growth-stage. This has left many companies dependent on US crossover funds, leading to a loss of domestic IP, talent, and scaling opportunities.
  
  The BVCA is calling for government backed programmes such as the British Business Bank’s new £4 billion Growth Capital Initiative to ensure participation by emerging and sector-specialist life sciences fund managers, including extending support to those focused on early growth-stage equity.
   
• In digital technology – AI already accounts for a quarter of recent UK venture capital funding, but the ability of world-class universities across the UK to spin out innovative companies is hindered by complex internal procedures and investor processes.
  
  This could be addressed by Government adopting all recommendations made in the 2023 independent review of spin-out companies, which are yet to be fully implemented.
   
• In defence – The private capital sector is increasingly engaged, raising new funds and partnering with government. UK-based defence tech companies raised £295 million in equity in 2022, up from £15 million in 2013, with strong growth continuing into 2024. But greater coherence across policy, regulation, and messaging is needed to scale their impact.
  
  Procurement reform and access to government contracts, especially for mid-market and scale-up investors would support greater levels of private capital investment. Phased approaches based on pilots and trials ahead of full procurement awards would support this and give investors confidence in the opportunities available to smaller players in the market.