Investment in UK start-ups has reached its lowest level in six years, highlighting the growing challenge the government faces in stimulating economic growth.
In the three months to September, there were just 32 fundraising rounds for early-stage companies, down from 75 in the previous quarter, according to data provided to The Times.
A study commissioned by VenturePath, an investor group focused on early-stage companies, revealed that UK startups raised £162 million by issuing shares to external investors during this period. This is the lowest quarterly figure recorded in at least six years. Despite the decline in the number of funding rounds, the average amount raised in so-called Series A funding rounds rose to more than £5 million, compared to £4.2 million in the previous quarter.
Research by Beauhurst, a firm that monitors private business activity, suggested the UK was struggling to expand businesses beyond the start-up stage, which could hamper wider economic growth. Rachel Reeves has committed to leading the most pro-growth Treasury in the country’s history, with a focus on boosting UK GDP growth to the highest level in the G7.
As the Autumn Budget approaches, Chancellor Rachel Reeves is expected to implement tax rises and public spending cuts of £40bn, reallocating funds within various departments. However, the UK’s growth prospects remain hampered by sluggish productivity and a lack of investment since the 2008 financial crisis, with further constraints on early-stage financing likely to stifle innovation and technological progress.
Michael Moore, chief executive of the British Private Equity and Venture Capital Association, said: “We urgently need a significant injection of new capital into venture capital funds that support innovative companies that will drive the UK economy forward.”
Julian David, CEO of techUK, added: “These companies play a crucial role in helping the UK Government achieve its strategic objectives by delivering innovative solutions to some of the country’s most pressing challenges.”