The UK government has been called to go further and deliver on tax, pensions and regulation, in order to increase investment in domestic businesses.
New research from the British Private Equity and Venture Capital Association (BVCA) has found that private capital investors believe the UK remains an attractive place to invest.
It showed that four in 10 (39%) of those surveyed by the BVCA ahead of its annual summit view the UK as a good or excellent place to build a business, compared to just one in five (20%) who state the UK is not an attractive investment destination.
The research also revealed that a balance of investors expect to increase their investment in the UK in the coming five years, with 29% likely to invest more compared to 20% who expect to reduce their investment.
The BVCA highlighted that in 2024, private capital investment in the UK rose by 44% year-on-year to £29.4bn (€34bn).
Asked what determines whether the UK is an attractive place to invest, a strong domestic economy (36%), clarity around long-term approach to taxation (33%) and the regulatory environment (38%) were among the most commonly cited factors by private capital investors.
With £190bn in UK-managed private capital ready to be deployed, the BVCA has called for the UK to cement its place as the premier global hub for the industry.
For this to happen, the BVCA said investment conditions must continue to improve.
To drive investment-led growth, ahead of the UK’s autumn budget, the BVCA is calling on the government to, among other things, reform the tax relief system to reward long-term investment.
It said that better targeting and a modernisation of the system is needed to ensure long-term investment, encourage the use of patient capital, support high-growth sectors and drive regional investment.
It pointed out that there is a particular opportunity to boost investment in scale-ups through reform of schemes such as Enterprise Management Incentives (EMI), Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT).
The BCVA also urged the government to champion regulatory innovation. It said that by expanding the use of agile tools like sandboxes, fast-track approvals in innovative areas, and setting stable long-term roadmaps, the UK can unlock greater private capital investment into exciting and high-potential sectors, such as AI, life sciences, clean tech and defence.
Smart regulation is key to converting the UK’s cutting-edge research into scale-ups, exports and global competitiveness, it added.
Reforming pensions
Lastly, BVCA called on the government to go further and faster in reforming pensions. It said that the government’s pension reform agenda must continue at pace to ensure UK pension funds are able to invest effectively in private capital funds which back scale-up businesses in every nation and region of the UK.
Michael Moore, BVCA chief executive officer, said: “The UK can be at the forefront of a new wave of global investment, but to do so, the government must help ensure that the UK is the most attractive destination it can be. Private capital already supports jobs, backs growth and invests across all the nations and regions of the UK, but this industry can go even further with the right conditions in place.”
Moore added that the industry needs to see the government “go further and deliver on tax, pensions and regulation”.
He said: “Private capital is standing by to invest even more into Britain’s future, but only if, as a nation, we adopt a system that is pro-growth, pro-innovation and globally competitive.”
The research findings were presented to the UK’s chancellor of the exchequer, Rachel Reeves, who said private investment was central to unlocking growth.
“More companies planning to step up investment here underlines Britain’s strength as a place to build long-term success. Through our Plan for Change and the Leeds Reforms, we are making it easier for firms to raise capital and for investors to back them, giving businesses the certainty they need to thrive and ensuring the UK remains one of the most attractive places in the world to invest, scale and succeed.”
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