Quarterly Review – January 2021

This report is the second edition of the BVCA’s Quarterly Review, our regular publication designed to demonstrate the impact of private equity and venture capital on the UK economy using the latest data and research.

At their core, private equity and venture capital are simple concepts. They provide businesses with the capital and operational expertise they need to grow and succeed, creating jobs, driving economic growth and building stronger, more sustainable companies.

It is precisely these attributes the UK economy will need in 2021 and beyond as we seek to rebuild from the damage wrought by COVID-19. The roll-out of the coronavirus vaccines is undoubtedly a cause for celebration, and with attention now turning to what life will look like postpandemic, our industry is poised to play a significant role in the recovery.

In this issue, we explore just how significant. Research published last year by Invest Europe shows the economic footprint of venture capital and private equity across all of Europe (including the UK), revealing that our industry supports more than 22,600 businesses – 14,500 of which are small and medium-sized enterprises – which in turn employ a total of 10.5 million people. These same companies reported an average job creation rate of 5.5.%, far in excess of the European private sector average of 1.1%.

These impressive figures are complemented by an equally striking set of numbers from two reports looking at how venture capital is fuelling the technological revolution, both here in the UK and throughout Europe. Atomico’s annual report - The State of European Tech – illustrates in great detail how important venture capital is to powering those companies operating at the cutting edge of innovation across a range of sectors, not least climate change. Since 2016, US$11 billion has been invested into European tech companies targeting climate action.

Closer to home, Dealroom and Tech Nation’s 2020 review finds that not only is the UK leading the way as the European home of tech investment, but this investment is occurring right across the country. Over the course of 2020, it was not London that saw the largest percentage increase in funding, but Oxford, Newcastle and Glasgow.

As the “innovation nation”, home to some of the most exciting and dynamic tech businesses in the world, the UK is attracting significant international attention. In 2020, venture capital investment here reached US$15 billion, the highest total in Europe and more than Germany and France combined. Much of this came from venture capital funds based in North America, and to a lesser extent Asia, who now see the UK as one of the leading tech hubs in the world.

In a post-Brexit world, ensuring we remain a global destination for investment is vital to the long-term success of our economy, and as all of the data in this edition of the Quarterly Review shows, the private equity and venture capital industry is well placed to play its part.

 

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