British start-ups have received $15bn in investment from VC firms so far this year, according to a new report. This beats the $8bn and $7bn invested in France and Germany respectively and puts the UK behind only the US and China as a destination for Venture Capital investments.
In quarter 3 alone, $4.9bn was invested into UK start-ups – a 14% uplift from quarter 2, the report from HSBC Innovation Banking (formerly Silicon Valley Bank UK) and Dealroom has revealed.
Britain is on track to attract $18bn in start-up investments in 2023, “down from the boom years of 2021 and 2022 but slightly higher than the $17bn recorded in 2020,” reports The Times.
In the third quarter of this year, US investors were the biggest source of VC investment for UK start-up firms at 37%, beating UK investors which accounted for 31% of the total. Meanwhile European investors accounted for 9%, Asia 4% and the rest of the world 20%.
But as start-ups look abroad for financial backing, these figures could be a concern for both the City and British government.
In July, Chancellor of the Exchequer Jeremy Hunt outlined plans to boost pensions and increase investment in British businesses. This included the ‘Mansion House Reforms’ which he says could unlock an additional £75 billion for high growth businesses, while reforms to defined contribution pension schemes will increase a typical earner’s pension pot by 12% over the course of a career.
He says the reforms will help unlock up to £75 billion of additional investment from defined contribution and local government pensions, supporting the Prime Minister’s priority of growing the economy, and delivering tangible benefits to pension savers.
The UK has the largest pension market in Europe, worth over £2.5 trillion. Over the past ten years Automatic Enrolment has helped an extra ten million people save for their futures, with £115bn saved in 2021, but how this money is invested is limiting returns for savers.
Comparable Australian schemes invest ten times more in private markets than UK schemes, reaping the rewards that UK savers are missing out on.
To level the playing field, the Chancellor and the Lord Mayor have supported an agreement between nine of the UK’s largest Defined Contribution pension providers, committing them to the objective of allocating 5% of assets in their default funds to unlisted equities by 2030. These providers represent over £400bn in assets and the majority of the UK’s Defined Contribution workplace pensions market.
This could unlock up to £50bn of investment in high growth companies by 2030 if all UK Defined Contribution pension schemes follow suit.
More effective investments by defined contribution pension schemes will also increase savers’ pension pots by up to 12%, or as much as £16,000 for an average earner.
CAPITAL MARKETS
The UK has the largest stock market in Europe and one of the deepest in the world – the London Stock Exchange had the most Initial Public Offerings (IPOs) outside of the US in 2021.
In a statement, the government said a comprehensive set of reforms will help attract the fastest growing companies in the world to grow and list in the UK.
Prospectuses will also be simplified, another milestone of Lord Hill’s UK Listing Review, which it said will replace the EU’s outdated regime. This means that firm’s prospectuses for investors will be easier to produce, more accessible and understandable, saving companies time and money and attracting more firms to do business in the UK.
And it said protectionist rules inherited from the UK’s time in the EU will be abolished. “The Share Trading Obligation and Double Volume Cap have held back UK businesses and will be removed so firms can access the best and most liquid markets anywhere in the world,” it said.
Following the Financial Services and Markets Act 2023 passing into law, the government has also announced that it is commencing repeal of almost 100 pieces of “unnecessary retained EU law for financial services, further simplifying the UK’s regulatory rulebook”.
It has launched an independent review into the future of payments too – led by Joe Garner, former Chief Executive Officer of Nationwide Building Society – to help deliver the next generation of world class retail payments, including looking at mobile payments.
And it says it “welcomes a report suggesting ways to move to fully digital shares, scrapping outdated paper-based shares”. This will make markets more efficient and modernise how people own shares.
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