Funding for UK start-ups falls to six-year low

Investment in early stage businesses has fallen to a six-year low, highlighting the challenge faced by the government in reviving economic growth.
In the three months to September there were 32 fundraising rounds for start-ups, the lowest number since 2018 and down from 75 in the previous quarter, according to data shared with The Times.
A study commissioned by VenturePath, a group of investors who channel capital into early stage businesses, reported that companies raised £162 million in the past three months by offering shares to external investors for the first time, also the lowest figure in at least six years.
However, the average amount generated by firms from these so-called Class A funding rounds rose sharply to over £5 million in the quarter to September, from £4.2 million in the previous three months.
The research, carried out by Beauhurst, a firm that examines activity among private companies, indicated that the UK is struggling to progress businesses from the start-up to the scale-up phase, a possible block to enhancing economic growth.
Rachel Reeves has promised to lead the most pro-growth Treasury in UK history, with the government aiming to increase the UK’s GDP growth rate to the highest in the G7.
The chancellor is expected to raise taxes and trim public spending by £40 billion in the budget on October 30, cutting current spending in some departments while also topping up other departmental budgets.
• Rachel Reeves: If growth is the challenge, investment is the solution
In 2022, an average of 102 companies launched Class A funding rounds each quarter, with the average backing for each business amounting to £4.2 million.
Alongside other rich economies, UK growth has faltered since the 2008 global financial crisis, largely due to poor productivity improvements and slow investment. Barriers to accessing early stage funding could further inhibit productivity growth by stifling technological innovation.
Michael Moore, chief executive of the British Private Equity and Venture Capital Association, the sector lobbying group, said: “It is clear that we need to get significant new capital into the venture capital funds which back the innovative businesses that will be the backbone of the British economy in years to come.”
Julian David, chief executive of techUK, the trade association for the technology sector, said: “These businesses are critical to achieving the UK government’s strategic objectives, providing innovative solutions to some of the nation’s most urgent challenges.”