Some £338 million has been invested in VC-style funds by the government since 2000 in an attempt to support early-stage, innovative companies, finds the National Audit Office (NAO).

However, the financial performance of many of the funds is poor. Regional venture capital funds, which have received £74.4 million of taxpayers’ money to invest in companies in the different regions of England, returned minus 15.7 per cent on average, with the government’s investment collapsing more than 90 per cent to £5.9 million since 2002. The NAO report concludes that the regional funds’ design and investment criteria have impeded their performance.

The UK High Technology Funds, in which the government invested £20 million in the early years of this decade, have returned minus 9.7 per cent per annum, with only one in nine funds showing a positive return.

Among the few longer-established funds to make money for the taxpayer are the Bridges Funds, which invest in the 25 per cent most disadvantaged areas of England. These vehicles, which can invest in property as well as trading companies, achieved a positive return of 7.7 per cent.

Private sector venture capital has also delivered negative returns over the past decade, according to data from private equity association the BVCA.