Venture capital should be available to more businesses outside London and the South-East, a report claims.
There also needs to be investment in a more diverse range of business leaders, the Treasury Committee finds.
With capital disproportionately allocated to London and the surrounding areas, high-potential firms in other UK regions and nations are struggling for access to backing, it is claimed.
Because businesses outside London usually take longer to get established, they tend to be more penalised by the upper age limits of businesses which are eligible for venture capital investment supported by two of the Government’s tax relief schemes.
Accordingly, the report recommends that HM Treasury consult on extended age limits from 2025 with the objective of alleviating regional inequality.
The report finds that diversity in the sector is “extremely poor,” both in terms of the characteristics of business founders in receipt of venture capital funding and the people who make venture capital funding decisions.
Women and people from ethnic minorities are highly under-represented in both groups – a factor which holds the sector back.
The Treasury Committee recommends that sound statistics showing diversity should be a condition of venture capital providers receiving the tax relief; that venture capital firms should be required to comply with the Investing in Women code; and that the Government and British Business Bank consult on the creation of venture capital funds specifically targeted at women and ethnic minority founders.
In general, the report recommends reviewing funding limits to better support scale-up businesses and incentives to encourage more regional venture capital investment.
