The government and the City joined forces this week to announce three new venture capital funds worth Pounds 240 million.
The move, the latest in a stream of measures aimed at boosting entrepreneurial activity in the United Kingdom, was announced at a conference highlighting the growing importance of venture capital for small and medium firms throughout the European Union. The funds will be targeted at high-tech areas such as computers, biotechnology, electronics and communications.
A Treasury spokesman said university spin-offs and science parks were among the entrepreneurial activities the funds would try to support. He added that paymaster general Geoffrey Robinson is "very impressed" with the collaboration between universities and businesses in the United States that has led to successful high-tech enterprises. Mr Robinson would like to see similar developments in the UK and rest of Europe.
City firm Baring Private Equity Partners in collaboration with its parent company ING Bank and the European Investment Bank is stumping up Pounds 120 million for one of the schemes. A second Pounds 100 million fund is being established by British venture capital firm Advent. The fund, which includes Pounds 7.5 million from the EIB, will invest 80 per cent of its funds in the UK and the remainder in the rest of Europe. A further Pounds 20 million is being raised by the Midland Bank and EIB.
Announcing the initiatives, chancellor Gordon Brown said encouraging entrepreneurs to start new businesses and helping dynamic small firms to grow is vital to achieving high levels of growth and employment: "The funds will do much to encourage initiative among businesses seeking to launch new ideas and products."
According to the British Venture Capital Association, the UK venture capital industry is the largest and most developed in Europe, accounting for 44 per cent of total investment, and is second only in importance to the US. Since 1983, UK venture capital firms have invested Pounds 19 billion in the UK in more than 16,500 companies.
A record Pounds 4.2 billion was invested in 1997 and more than one million people in the UK are employed in firms backed by venture capital. The number of jobs in venture backed firms increased by 15 per cent per annum against a national growth rate of 1 per cent.
But in a European Commission report published this week, Brussels says that apart from the UK, and to a lesser extent Germany, the development of risk capital in Europe "remains rather limited" and lags far behind that in the US.
PFI report, page 4