Investments made by venture capital trusts (VCTs) fell by 28% to £506m in 2023, according to figures from the AIC.
While the drop from the £705m recorded in 2022 was notable, it was less than the wider venture capital industry experienced. UK and Ireland venture capital investments fell by nearly half (46%) in 2023 to £16.5bn from £30.3bn, according to figures from Pitchbook.
Most of the VCT investments made in 2023, £454m, went into 251 private companies, with a further £52m going into 24 AIM companies. In 2022 VCTs invested £658m in 341 private companies and £48m in 22 AIM companies.
Between 2021 and 2023, VCTs invested a total of £1.89bn in private companies and AIM companies.
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Richard Stone (pictured), chief executive of the AIC, said: “Last year VCTs’ investment in private companies slowed due to challenging investment conditions. It took time for businesses to adapt to higher interest rates and sluggish economic growth which impacted valuations and deal times. However, VCT investment activity held up better than the broader venture capital industry.
“VCTs have many advantages for investors, including attractive tax benefits and good long-term performance, and their investee companies create jobs and social benefits for local communities across the UK,” Stone continued.
“These advantages help to shore up capital raising in difficult economic conditions and give VCT managers confidence to continue investing in tough times, when other venture capital investors are pulling back.”
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Ewan MacKinnon, a partner at Maven Capital Partners, added: “The first half of 2023 was certainly sluggish in terms of quality new opportunities, in line with the trend across the market, due to uncertainty arising from the Budget turmoil in late 2022.
“However, in the second half of 2023 and early 2024 we’ve seen an encouraging increase in activity and opportunities as economic conditions have improved and deal flow has now largely recovered across our UK regional teams.”
