Investment into venture capital trusts has exceeded £1bn for the second year in a row.
Some £1.08bn was invested into VCTs in the 2022/23 tax year, according to the Association of Investment Companies.
The figure is a 5 per cent drop on the £1.1bn invested in the previous year.
In the 2022 calendar year, VCTs invested £700mn in new and follow-on investments, with £652mn of that in private companies and £48mn in AIM-quoted firms.
Richard Stone, chief executive of the AIC, said this investment in small companies is “much needed”.
“During a tough year for investors, demand for VCTs remains near record levels demonstrating the numerous benefits they bring,” he said.
“It is crucial VCTs can continue to fund young businesses which create jobs, develop skills and knowledge, increase exports and raise the tax take across many sectors including healthcare and technology.”
Historic VCT fundraising excluding enhanced share buy-backs
Tax year | Fundraising (£mn) |
2022/23 | 1,078 |
2021/22 | 1,134 |
2020/21 | 685 |
2019/20 | 619 |
2018/19 | 731 |
2017/18 | 728 |
2016/17 | 542 |
2015/16 | 457 |
2014/15 | 429 |
2013/14 | 420 |
Source: AIC
Alex Davies, founder and CEO of VCT broker Wealth Club, said it is easy to see why VCTs remain attractive.
“If you are a wealthier investor, you are caught between higher taxes on one hand and restrictions on where you can invest on the other,” he said.
“But it is not just about saving tax, VCTs are also exciting: you’re backing some of Britain’s youngest and brightest companies and, probably adding something completely different to your portfolio."
The VCT sector underwent a consolidation last year, with the original players “cashing in” and leaving the market.
Figures released by HMRC in January show 52 VCTs managed funds in the 2021/22 tax year, down from 57 the year before.
However, there was a rise in the number of VCTs raising funds in the period, with six more in the market, taking the total to 46.
HMRC said the number of funds raised by VCTs and the number of VCTs raising money are normally closely linked, however in recent years this is less evident.
“This trend has continued in 2021 to 2022, with a large increase in funds raised but a modest increase in the number of VCTs raising funds,” it said.
sally.hickey@ft.com
