The Association of Investment Companies (AIC) has published “Investing for the future”, which shows that VCTs continue to play an important role in addressing the UK’s finance gap.
Investment in SMEs has remained strong throughout the financial crisis. VCT managers provided details of 78 first time investments in 2012 totalling GBP145m, with the average size of a first time investment averaging GBP1.81m – directly targeting the finance gap.
Amongst respondents, a further GBP211 million of follow on investment went to 160 companies in 2012.
The AIC received information from 399 SMEs1, representing approximately 40 per cent of the VCT sector.
Key findings include:
· VCTs are patient investors, with the average investment held for around six years, though some companies remain in the portfolio for ten years or more.
· Investee companies created on average 52 new jobs following investment.
· Investee companies created on average GBP10.8m of new turnover following investment.
· 78 per cent of investee companies had a representative of the VCT fund management group team on their board, illustrating that it is the combination of investment and business experience that provides sustainable benefits to the economy.
· 41 per cent of investee companies exported.
· 31 per cent of investee companies reported an investment in research and development (R&D) in the last 12 months, with an average spend of just over GBP1m per company.
Ian Sayers (pictured), director general of the AIC, says: “This research shows the government’s support for VCTs has been well rewarded. VCTs are bridging the finance gap and supporting job creation and innovation in what remains a challenging economic environment. The combination of investment and business experience offered by VCTs provides real and sustainable benefits to the wider UK economy.”
Following original investment from VCTs, the investee companies reported that London has seen the greatest job creation, with 4,102 new jobs. This was followed by the North West (1,934 new jobs), Midlands and East Anglia (1,817 new jobs), the South East (1,501 new jobs), South West (1,331 new jobs), Scotland (1,240 new jobs), and the North East (614 new jobs). Northern Ireland saw just 205 new jobs created, whilst Wales experienced a loss of 42 jobs.
It is the technology & IT sector which has seen the greatest job creation since the original VCT investment (3,126 new jobs), followed by the leisure and hospitality sector (2,343 new jobs), business services (2,300 new jobs), and healthcare (2,047 new jobs).
