Investment in UK start-ups has reached its lowest level in six years, highlighting the growing challenge for the government in boosting economic growth.
There were just 32 early-stage fundraising rounds in the three months to September, compared to 75 in the previous quarter, according to data provided to The Times.
A study commissioned by VenturePath, an investor group focused on early-stage companies, found that UK start-ups raised £162 million during this period by issuing shares to external investors. This is the lowest quarterly figure in at least six years. Despite the decline in the number of funding rounds, the average amount raised in so-called Class A funding rounds increased to over £5 million, compared to £4.2 million in the previous quarter.
The research, carried out by Beauhurst, a company that monitors the activities of private companies, suggested that Britain is struggling to scale up businesses beyond the start-up phase, which could hamper broader economic growth. Rachel Reeves has committed to leading the most pro-growth Treasury in the country’s history, with a focus on driving UK GDP growth to the highest level in the G7.
With the autumn budget looming, Chancellor Rachel Reeves is expected to introduce tax increases and cut government spending by £40 billion, with resources redistributed across departments. However, Britain’s growth prospects remain hampered by sluggish productivity and a lack of investment since the 2008 financial crisis, with further restrictions on early-stage financing potentially hampering innovation and technological progress.
Michael Moore, CEO of the British Private Equity and Venture Capital Association, said: “We urgently need to inject substantial new capital into the venture capital funds that support the innovative companies that will drive the UK economy forward.”
Julian David, CEO of techUK, added: “These companies play a vital role in helping the UK government achieve its strategic goals by providing innovative solutions to some of the country’s most pressing challenges.”