VCTA responds to Parliamentary Committee inquiries into economic landscape post-COVID-19

The Venture Capital Trust Association (VCTA) has submitted written responses to two Parliamentary Select Committee inquiries into the economic landscape, post-COVID-19. 

Responding to the BEIS Committee’s inquiry into Post Pandemic Economic Growth, the VCTA submission highlighted the vital role VCTs have played in supporting businesses which may have been ineligible for support through the Government’s Future Fund and CBILS schemes. The submission also raised the potential opportunities to build on the success of the VCT scheme as we approach the end of the Brexit transition period. 

Responding to the Treasury Committee inquiry into Tax After Coronavirus, the VCTA highlighted the vital role that tax reliefs play in supporting investment in the country’s leading SMEs, helping to create jobs and stimulate growth in the process. 

The submissions can be read in full by clicking the links below. 

VCTA submission to BEIS Committee inquiry into Post-Pandemic Economic Growth.

VCTA submission to Treasury Committee inquiry into Tax After Coronavirus.

VCTA welcomes the publication of the Future of Growth Capital report

The VCTA has welcomed the publication of the Future of Growth Capital report, which makes several important recommendations to address the UK’s growth capital gap and to support and champion more consistent regional growth.

The report, led by The ScaleUp Institute and Innovate Finance, notes the importance of VCTs as the “cornerstone of early-stage growth capital and follow-on funding”.

Commenting on the report, Chair of the VCTA, Stuart Veale, said:

“Entrepreneurs throughout the UK require an urgent solution to the funding challenges facing the future prosperity of growth companies. This report highlights that to deliver this support quickly, we must build upon existing frameworks that can deliver regionally-focused, patient capital – the VCT industry will fully support this vital work.”

As well as highlighting the contribution of VCTs, the report highlighted constraints on the flow of growth capital to UK SMEs resulting from regulatory barriers, such as “rules that limit their follow-on funding ability with existing portfolio companies which necessarily impedes the ability for businesses to scale with their existing investor base.” The report recommended regulatory change to increase the flow of growth funding.

The full Future of Growth Capital report can be found here.

VCTA welcomes TheCityUK Recapitalisation Group report on post COVID-19 recovery

The VCTA has welcomed the publication by TheCityUK’s Recapitalisation Group of its report on supporting the economic recovery following COVID-19, and its recognition of the crucial role of VCTs in supporting business. 

The report highlights the number of jobs and SMEs at risk if action is not taken to tackle up to £35bn in unsustainable debt that could result from COVID-19 emergency loans. 

The VCTA welcomes the findings of the report and in particular its positive outlook towards the role of VCTs in supporting the UK’s SMEs, both in terms of the work that they currently do and the potential for more work in the future should the existing rules be relaxed. 

Stuart Veale, Chair of the Venture Capital Trust Association, commented: “TheCityUK has provided welcome recognition of the experienced and embedded role that the VCT industry already plays in the UK’s growth economy. With £4.4bn in funds and offices spanning every regional hub, VCTs provide a proven model for regionally-focused, patient capital.

“VCTs are now ready to deliver an immediate and urgent expansion of their support of entrepreneurial, innovative companies across the UK. We encourage Government to consider the findings of the report and the regulatory changes recommended that could enable VCTs to provide further vital investment that will drive forward our recovery and aid the levelling-up agenda.”

In June, the VCTA responded to the Recapitalisation Group’s interim report, outlining how new VCT structures and changes to the current scheme rules could boost investment across the country in a wider number of businesses. 

The VCTA will continue to engage with TheCityUK and other industry bodies working on the recapitalisation challenge, highlighting the role of the VCT industry in supporting the economic recovery post-COVID-19. 

VCTA Chair calls for further boost for SMEs

​Speaking to The Telegraph, VCTA Chair Stuart Veale ​has called on the Government to do more to support SMEs across the country that have been unable to access investment through the Future Fund. 

The article outlined the wider concerns that many UK start-ups have voiced regarding the lack of government funding available to them through the Future Fund. 

Providing funding of up to £5m for start-ups, the Future Fund was launched in May and matches state funding with support from private investors in the form of a convertible loan. 

While the Future Fund has had over 600 applications with over £320m in taxpayer funding, concerns have been raised across the industry, ​as the scheme does not permit investment alongside EIS or VCT funding due to state aid rules. 

Responding to these concerns, Stuart said that “swathes of small and medium sized businesses throughout the UK are unable to access vital investment, particularly while EIS and VCT funds remain unable to invest alongside the Future Fund”. 

The article can be read in full here. 

VCTA response to TheCityUK Recapitalisation Group Interim Report

The Venture Capital Trust Association (VCTA) has submitted a written response to TheCityUK’s Recapitalisation Group Interim report into the role of the private sector into supporting UK SMEs to manage debt built up as a result of the COVID-19 pandemic.

The Interim Report’s identifies two key challenges facing many UK SMEs: managing the recapitalisation of the debt burden taken on by businesses as a result of the pandemic; and ensuring that businesses have access to sufficient growth capital.

In response, the VCTA has proposed the creation of a “Growth VCT” structure alongside changing the rules regarding which companies are eligible for VCT funding. These changes would leverage an investment product that retail investors are familiar with and which has appropriate protections for investors, unlocking additional funds that could be deployed rapidly across the UK and through an established regional infrastructure.

The VCTA’s submission can be read in full here.

Shadow Industrial Strategy Minister praises "brilliant scientists" behind local biotech company

Away from the Westminster talk of prorogations and General Elections, it was business as usual for Labour Shadow Industrial Strategy Minister Chi Onwurah MP on Friday 6 September as she visited pioneering biotechnology company Newcells Biotech, based in her constituency of Newcastle upon Tyne Central.

Founded in 2014 as a spin out from Newcastle University, Newcells Biotech specialises in harnessing stem cells for use in drug discovery – operating as a supplier for the pharmaceutical and biotechnology sectors. Boasting the knowledge and experience of a multidisciplinary team from industry and academia, Newcells Biotech is based in one of the UK’s leading centres for stem cell biology and is located alongside one of the largest research-intensive medical university and hospital complexes in the country. 

With support from local Venture Capital Trust (VCT) fund NVM, Newcells has been able to hire four new members of staff, grow existing revenue streams and prepare for the launch of a new range of products. In addition to providing financial support, NVM has also been able to provide Newcells with the experience and expertise of two observers on its company board.

During a discussion about what a Labour government could do to support businesses like Newcells, key issues were continued access to patient capital through VCT funding, and tax incentives for research and development. The ability of companies like Newcells to recruit and retain talent from across Europe was also flagged as a pressing issue given the UK’s imminent departure from the European Union.

On the visit, Ms Onwurah said:

“It was great to meet a local start-up company with brilliant scientists working to address some very important health challenges with innovative new technology, supported by local venture capital. It’s one of the success stories we should be championing as a city and a region”.

Ms Onwurah also tweeted about the visit, praising Newcells for employing “brilliant scientists from all over the world including Fenham”.

Newly-appointed Minister visits pioneering pharmaceutical developer

Fresh from her promotion to Minister for Children and Families at the Department for Education, Kemi Badenoch MP this week visited pioneering pharmaceutical developer Arecor Limited to discuss the current climate for SMEs in the healthcare industry. Using its innovative Arestat platform, Arecor has been able to successfully leverage a portfolio of proprietary products enabling improved treatment for diabetes care.

Mrs Badenoch heard about the role that investment from Venture Capital Trust (VCT) funds Albion and Downing played in Arecor’s growth. With VCT investment of over £6 million, Arecor has been able to successfully grow as a business, invest in product development and expand its workforce to twenty staff, with plans for further recruitment in the coming months.

A vocal supporter of Britain leaving the European Union, Mrs Badenoch was also keen to hear about Arecor’s plans for expansion in Saffron Walden in the coming years, alongside any new and developing partnerships the company had planned in markets outside of Europe.

Upon arrival, Mrs Badenoch was greeted by Arecor CEO Dr Sarah Howell and CFO Susan Lowther, who introduced the Minister to the company’s pioneering work, before providing a tour of their high-tech facility in Saffron Walden. 

On the visit, Dr Sarah Howell, CEO of Arecor, said: "It was fantastic to meet with Mrs Badenoch and discuss life as an SME.  She was very supportive, taking time to understand our business and the challenges we face.  We look forward to building a positive, active relationship and to see her support the issues facing our industry in parliament."

Mrs Badenoch said that she “enjoyed learning so much about Arecor’s business and their contribution to our local economy”. On Arecor’s pioneering work in the field of drug improvement, she said that “their work in taking existing drugs like insulin and enhancing them to improve results for their patients is groundbreaking”, adding that she was also glad to hear that Arecor “found Chesterford Research Park to be one of the best places to attract talent in research and development”, which vindicated the council’s decision to invest in the Park.

Moving forward, Mrs Badenoch said that Arecor “has a very constructive relationship with the Government, especially regarding research funding” and added that she would continue to support the business in this regard whenever possible.

Veteran Labour backbencher praises "technical innovations" of local business SmartKem

Award-winning business SmartKem welcomed local Labour MP Graham Stringer to their technology facility in Blackley last Friday (7 June).

As a member of the Science and Technology Select Committee, Mr Stringer was eager to hear about SmartKem’s industry-leading status as a supplier of organic semiconductors used in flexible electronic display technology.

Mr Stringer also heard about how SmartKem’s innovative truFLEX platform helped the business  win the Printed Electronics Asia award for Best Advanced Material Development alongside the 2015 Innovative Product of the Year award for Wales.

With support from venture capital trust (VCT) fund Octopus, SmartKem was able to create an additional 20 jobs in Blackley and Broughton, whilst also expanding the business’ operations into the Asian market.

Mr Stringer was greeted by Ian Jenks and Dr Beverley Brown, SmartKem Interim CEO and Chief Technology Officer respectively. Following the visit, Mr Stringer said:

“Having visited the Blackley site of SmartKem’s technology facility today I was deeply impressed by the technical innovations this company is making. It was a quick glance into the future and it’s great to have such a high-tech firm in the middle of the constituency”.

Celebrating Venture Capital Trusts in Parliament

The Treasury Select Committee Chair, International Trade Minister for Investment and  Small Business Minister walk into a room…

No, it’s not the start of a politically niche joke, but the three distinguished speakers – Rt Hon. Nicky Morgan MP, Graham Stuart MP and Kelly Tolhurst MP – introduced onto the stage by the Venture Capital Trust Assocation’s (VCTA) Chairman Tim Levett to speak on venture capital trusts (VCT) at the VCTA’s inaugural parliamentary reception.

The speeches, whilst different in scope, were overwhelmingly positive about the role of VCTs in supporting small, higher risk SMEs that would otherwise find it difficult to obtain long-term risk finance. The speakers also praised the VCTA for their specific contribution in supporting British small businesses – the backbone of the UK economy – to start up and scale up.

The guests heard how for every £1 million of investment, there is a £2.2 million increase in turnover, and how the VCT scheme provides true ‘patient’ capital (the average duration of a VCT investment is seven years and often, VCTs fund businesses with multiple rounds of investment). Furthermore, where VCT investment has been present for over five years, the average increase in jobs is over 100 per company; in fact, companies currently backed by the VCT scheme have created 27,000 jobs since the first VCT investment.

The sector was rightly urged by both Ms Morgan and Ms Tolhurst to do more to ensure that female entrepreneurs receive greater venture capital investment. Both MPs highlighted the importance demonstrated by the recent Alison Rose Review that if the gap between female and male entrepreneurs was closed, an additional £250 billion in GVA would be added to the UK’s economy. The VCTA is looking at how it can continue to remove barriers facing female entrepreneurs and help to close this gap.

However, it wasn’t just the speeches (and canapes) that the guests turned up for.

A number of VCTA-backed businesses were on display: Mirada Medical, Empiribox, Masters of Pie, Chess Dynamics, Olio, and Proveca. These companies showcased just how diverse the sectors that VCTs invest in are – medical imaging, education, science, virtual reality, defence, sharing of surplus food and pharmaceuticals!

Guests were impressed by the interactive and innovative way of revolutionising science lessons for children, trying 3D models on for size in the world of immersive reality and discussing the importance of engineering expertise in the realm of aerospace and defence. Companies on the cutting edge of the medical world talked passionately about their work whilst food waste heroes explained the concept behind their food sharing app.

The VCTA was delighted to welcome so many political guests and industry colleagues to the House of Commons to celebrate VCTs at its inaugural annual reception and looks forward to celebrating future successes next year. If you’d like to hear more about the VCT scheme or the VCTA, please contact the Chairman, Tim Levett, via vcta@newingtoncomms.co.uk.

Shadow Industrial Strategy Minister visits award-winning specialist recruitment firm

Friday 10 May saw the visit of Shadow Industrial Strategy Minister Chi Onwurah MP to award-winning Venture Capital Trust-backed business Samuel Knight International, based in her constituency of Newcastle upon Tyne Central.

Samuel Knight International is a global recruitment firm providing specialist knowledge and skills to the energy and rail sectors, and in November 2018 the business was awarded the Team of the Year accolade at the Great British Entrepreneurial Awards.

With funding from Venture Capital Trust (VCT) fund Gresham House, Samuel Knight International recently announced plans to undergo rapid expansion by hiring an additional 40 members of staff in 2019.

Ms Onwurah was greeted by CEO Steve Rawlingson, who praised the role of VCT investment in the success of Samuel Knight International – commenting that “securing investment through the VCT scheme is just one way to expand our firm, not only for our own goals, but also for the benefit of the community around us”.

Ms Onwurah praised Samuel Knight International for “widening opportunities and tapping into new talent pools”. As a vocal supporter of increasing diversity in STEM subjects, Ms Onwurah added that she was particularly looking forward to seeing the progress made by Samuel Knight International in achieving gender balance within the energy and rail sectors.

The visit received coverage from the North East Times, with Ms Onwurah tweeting that she was “pleased to meet the great team at Samuel Knight International & hear of their growth plans”.