MPs raise concerns over regional inequality in venture capital funding

An influential Parliamentary committee has raised concerns about regional inequalities in venture capital funding.
By Greg Wright
Published 24th Jul 2023, 14:40 BST

The House of Commons Treasury Committee has concluded that venture capital investment is concentrated in London, which is “strongly disproportionate” to its share of the UK SME (small and medium-sized enterprise) population.

In its report, the committee states: “This means that throughout most of the UK regions and nations, opportunities for investment in high-growth businesses are more limited than they ought to be. This may be undercutting the potential for economic growth across the UK regions and nations."

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The MPs also found that the diversity statistics in the venture capital market are unacceptable.

House of Commons Treasury Committee's report said: "Venture capital firms are dominated overwhelmingly by white men, and the recipients of venture capital funding are even more unrepresentative of the wider UK population in terms of gender and ethnicity." (Photo of the Houses of Parliament supplied by PA)House of Commons Treasury Committee's report said: "Venture capital firms are dominated overwhelmingly by white men, and the recipients of venture capital funding are even more unrepresentative of the wider UK population in terms of gender and ethnicity." (Photo of the Houses of Parliament supplied by PA)
House of Commons Treasury Committee's report said: "Venture capital firms are dominated overwhelmingly by white men, and the recipients of venture capital funding are even more unrepresentative of the wider UK population in terms of gender and ethnicity." (Photo of the Houses of Parliament supplied by PA)

The report said: “Venture capital firms are dominated overwhelmingly by white men, and the recipients of venture capital funding are even more unrepresentative of the wider UK population in terms of gender and ethnicity. While there has been some improvement, it is happening far too slowly, and affecting rapid change should be viewed as a priority by Government and industry.

"It is difficult to understand comprehensively the diversity breakdown of staffing and investment decisions across the venture capital market and its many small organisations.

"These firms do not have consistent policies on diversity or associated reporting, and a heavy emphasis on personal networks means that the true scale of the problem remains unseen. The most urgent course of action is to improve the transparency and consistency of data. This will allow more informed action to be taken by Government, arm’s-length bodies and industry. Disclosure will also shine a light upon firms which are both best and worst in class, providing a reputational incentive to address diversity in the sector.”

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Dr Mark Payton, the CEO of Mercia Asset Management, said the industry should pay attention to the committee’s “compelling” conclusions.

He said Mercia saw opportunities to support businesses in Yorkshire, adding: “We continue to see great businesses coming forward.”

Richard Stone, Chief Executive of the Association of Investment Companies, added: “It has been encouraging to see more female-led and ethnically diverse teams receiving funding to grow their businesses, but there is widespread acknowledgement that further work in this area is needed for the schemes to reach their full potential.”

Related topics:MPsLondonGovernment