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Venture capital funds agree 'investment compact' to increase investment in UK high-growth companies

Today, the Chancellor of the Exchequer, Jeremy Hunt, announced that a group of UK venture capital funds have reached an agreement on the ‘venture capital investment compact’. The purpose of the compact is to increase investment into UK growth companies, bringing together venture capital funds and the pensions industry, with the aim of convincing pension funds to be limited partners in the funds that they manage. Whilst voluntary, the agreement has a number of large pension fund managers as signatories and is supported by the British Private Equity and Venture Capital Association.

This news is certainly welcome as growth companies in the UK compete in an increasingly competitive field for investment, amongst an ongoing uncertain economic backdrop, both in the UK and globally. It follows on from proposals for the creation of the Future Growth Fund (known as the Mansion House agreement) earlier this year, as part of which large pension fund managers agreed to invest in, amongst other things, high-growth companies. 

The attractiveness of the UK as an investment destination has been particularly up for discussion in recent times; from decreased investment activity in the second half of 2022 and the first half of 2023, to Arm Holdings’ decision to list in New York rather than London, and WE Soda’s cancelled London listing, later in 2023. Indeed, interest rates remain high (compared to recent history at least) and corporation tax rates in the UK for some businesses have risen from 19% to 25% from April this year.  

Despite uncertainty over economic conditions, the government will hope that today’s agreement signals the UK’s commitment as an investor-friendly environment. 

The initiative plays into wider plans to boost investment in homegrown tech and life sciences firms to help the UK compete with Silicon Valley. Britain has consistently ranked near the bottom of the G7 in recent years for all sources of private investment in the economy.

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