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Venture capital investing in UK falls by half, Government figures reveal PDF Print E-mail
News - Alternative Investments
Thursday, 03 February 2011 10:58

Investment in venture capital fell 48% in 2009, down from £1.30 billion in 2008 to £666 million in 2009, according to new figures released in the UK Government’s innovation survey.

The drastic decline needs to be addressed and it is important for the Government to promote the Venture Capital Trust (VCT) as a way of encouraging investments in British innovation and as a way for individuals to be involved in economic success, according to Julian Hickman, at partner with Longbow Capital, a specialist investor in the unquoted life enhancement and wellbeing sector.

VCTs were first introduced by the Conservative Government in 1995 to encourage investment in UK innovation and they have enjoyed a steady popularity amongst investors ever since.

As its name suggests a VCT is an investment trust and it is listed on the FTSE. The primary features of a VCT are the range of tax reliefs it offers to the investor. This includes income tax relief of 30% on investment, dividends from the VCT are free of income tax and any gains made on VCT shares are free from capital gains tax.

A VCT will typically invest into 20 to 30 companies, primarily to spread an investors risk by diversifying their investment.

‘VCTs are the primary vehicle through which private investors can invest in British innovation and promoting these as ways that individuals can invest should be a key priority for the Government. VCTs are a great way for anyone to share in the British innovation story and get the British economy moving,’ said Hickman.

The largest fall, 59%, was in later stage funding while seed and start up investments fell 42% and 32% respectively as investment faltered due to the recession. The figures have been released at a time of mounting speculation about how the Government will stimulate innovation as a counter to cutbacks.

According to the 2010 Innovation Report, which is published by the Department for Business Innovation and Skills, innovation has accounted for 63% of annual labour productivity growth since 2000.

‘At the G7 summit in Davos the Prime Minister stressed that the UK needed ‘an economy based not on government spending but on entrepreneurial dynamism’, but the figures reveal that this objective is missing the mark. It’s time for the Government to help stimulate British innovation so we can realise the dream of the increasingly talked about ‘innovation nation’. There are now big expectations about what the Government will offer in the pending Budget,’ explained Hickman.

Longbow Capital currently manages three EIS Funds (a fourth following closure of the 2010 Longbow Approved EIS Fund) and the Longbow SIPP Venture Fund. Longbow has led on investments of over £35 million into 12 unquoted life science companies. The Executive Partners have combined experience of investing in over 30 unquoted technology companies with several successful exits achieved.

It recently announced the launch of the Longbow Growth and Income VCT, a tax efficient investment vehicle offering investors the opportunity to invest in a portfolio of innovative British life enhancement and wellbeing companies.

The VCT aims to invest in 15 to 30 unquoted companies with a particular emphasis on products that can be distributed through Longbow’s link to Boots and the Boots Centre for Innovation (BCI).

 

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