Firms outside London attract the majority of private capital
The majority of private equity and venture capital investment in 2023 was made outside of London, according to new data from an industry body.
According to figures published by the British Private Equity and Venture Capital Association (BVCA), in 2023, most private equity and venture capital investments were made in firms based outside of London.
Just 47 per cent of the total amount invested into private companies last year went to firms based in the capital, down from 57 per cent in 2022.
In 2023, the UK’s private firms attracted £20.1bn of investment, of which £9.5bn went to ventures based in London.
The second most popular region for investment after London was the South East of England, which attracted 17 per cent of the overall investment figure, up from 10 per cent in 2022 and 14 per cent in 2021.
Meanwhile, the east of England attracted seven per cent, up from three per cent the previous year.
The two areas’ ability to attract increasing investment has been helped by the fact that Oxford and Cambridge are both located in the region.
Thanks to their respected universities, the two towns have cultivated a reputation for incubating successful tech and science-led start-ups, such as autonomous vehicle software provider Oxa (formerly Oxbotica) and Darktrace.
Ventures in finance and insurance proved to be the sector in which London was most dominant, with 81 per cent of investment into the sector being made to firms in the capital.
London did worst in biotech and healthcare, with nearly a quarter (24 per cent) of investment in the sector going to companies based in the South East.
The data from the BVCA also showed a downturn in the level of investment that the UK’s private firms were able to attract and which UK private equity and venture capital funds were able to lead.
Investment into unlisted businesses fell by over 30 per cent to £20.1bn in 2023, marking a major collapse from the high water mark of private equity and venture capital investment in 2021 of £50bn.
The findings prompted the BVCA to publish an accompanying manifesto of policies that will stimulate private investment ahead of the upcoming general election.
The demands included a call for improved public infrastructure and planning reforms, which, the organisation said, would particularly benefit firms outside London and the South East.
Also in the manifesto of recommendations were R&D tax credits that would allow research-driven companies backed by private capital to reinvest more and reforms to pension funds to focus on UK firms.
It also contained a thinly veiled warning to an incoming Labour government about the risk of abolishing what the party sees as the “carried interest loophole”, which is a tax relief on the share of profits that partners in private equity firms get. The body said that private investors’ tax system should reflect the risk private investors take.
