Investment in UK start-ups has hit its lowest level in six years, highlighting the growing challenge for the government in stimulating economic growth.
In the three months to September, there were just 32 fundraising rounds for early-stage businesses, 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 start-ups 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 drop in the number of funding rounds, the average amount raised in so-called Class A funding rounds rose to over £5 million, compared to £4.2 million in the previous quarter.
The research, conducted by Beauhurst, a firm that monitors private company activity, suggested that the UK is struggling to scale businesses beyond the start-up phase, which could hinder broader economic growth. Rachel Reeves has committed to leading the most pro-growth Treasury in the nation’s history, with a focus on boosting the UK’s GDP growth to the highest in the G7.
With the Autumn Budget on the horizon, Chancellor Rachel Reeves is expected to implement tax hikes and cut public spending by £40 billion, reallocating funds within various departments. However, the UK’s growth prospects remain hampered by slow productivity and a lack of investment since the 2008 financial crisis, with further constraints on early-stage funding potentially stifling innovation and technological progress.
Michael Moore, CEO of the British Private Equity and Venture Capital Association, stated: “We urgently need to inject substantial new capital into the venture capital funds that support the innovative businesses that will drive the British economy forward.”
Julian David, CEO of techUK, added: “These businesses play a critical role in helping the UK government achieve its strategic goals by offering innovative solutions to some of the country’s most pressing challenges.”
Read more:
Funding for UK start-ups falls to six-year low as investment slows
