Lack of capital is holding back scale-ups, report finds

Despite a funding gap, almost three quarters of scale-ups see the UK as an attractive place to build a business

Scale-ups say a lack of capital is holding them back from growth, a report from the Venture Capital Trust Association (VCTA) has found.

The research – gathered from a survey of 119 fast-growing firms – found over a third of start-ups identified the constraint above all other factors.

Although the UK is the VC hotspot of Europe and behind only the US and China for levels of start-up VC funding so far this year, there has been a decline of more than 60 per cent from Q1 2022.

Other growth barriers reported included accessing talent – particularly those in highly technical sectors such as life sciences or deep tech – with 17 per cent of entrepreneurs citing the problem as their main concern. Macro issues such as inflation (14%) and regulatory uncertainty (11%) were identified as significant barriers for some companies.

However, entrepreneurs remain buoyant about the UK’s tech-building prospects, with 73 per cent identifying the UK as an attractive place to grow a company.

Will Fraser-Allen, chair of the VCTA, said: “The vital role of VCTs in the investment ecosystem has never been clearer, and we are delighted to see that – despite the tough economic and investment climate – fast-growing scale-ups continue to back the UK as a place to grow, and there is substantial demand for the capital and talent required to drive further expansion.”

Richard Stone, CEO of the Association of Investment Companies (AIC), added: “It’s clear from this report that lack of funding and talent are real barriers to growth for the UK’s most promising companies. VCTs successfully help companies overcome these obstacles by providing essential scale-up capital and support which helps founders realise their aspirations. This is particularly important during economic downturns, when funding is even harder to come by, and VCTs may be the only source of capital.

“In challenging times, VCTs have continued to attract record levels of new capital to invest in promising young companies. The optimism of these ambitious companies about the UK’s position as a tech hub and a good place to do business bodes well for the future.”  

More on scale-up funding

British Business Bank wants to back more scale-upsThe bank’s new chief executive says he would like to see the bank plug a funding gap for scale-ups looking for £50m and more

Dom Walbanke

Dom Walbanke

Dom is a feature writer for Growth Business and Small Business, focused on matters concerning start-ups and scale-ups. He has also been published in the Independent, FourFourTwo magazine and various lifestyle...

Related Topics

Convertible Loan Notes