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Venture capital investment in UK start-ups drops 30pc
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Start-up investments fell from £125m to just £46m and total early stage financing stood at £224m, down from £303m in 2009. However, a surge in private-equity funding for management buyouts helped take the total investment by the risk capital industry to £8.2bn in the UK, up from £4.8bn in 2009 and back in line with levels not seen since 2008.
Venture capital investment plays "a vital role in stimulating economic growth", according to the British Private Equity and Venture Capital Association (BVCA), which compiled the figures.
David Cameron and US president Barack Obama on Wednesday both held out the US and the UK as "two of the world's most active investors in venture capital". They said they would "work together" to make sure "innovative, high-growth businesses have access to venture capital to fund their growth and create highly skilled jobs".
UK-based private equity and venture capital firms invested more overseas than they did in the UK for the fourth year in a row. In total, some £20.4bn was invested last year, up from £12.6bn. The firms raised £6.6bn in new money, up from £3bn in 2009, and tapped existing funds to make up the difference.
Buyout activity picked up "significantly", the BVCA said, with the value of UK deals rising to £4.7bn in 2010, up from just £1.7bn in 2009.
This activity helped improve the funds' potential profits before fees, according to a separate survey by PwC and Capital Dynamics.
Over a three-year period, average returns before fees are now 6.7pc, compared with 2.4pc for total UK pension fund assets and 1.4pc for FTSE All-Share.
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