Some 80% of private high-net-worth UK investors plan to allocate to private equity and other alternative asset classes over the next 12 months, according to a survey by Connection Capital, a London-based private markets and alternative investment platform.
A third of those surveyed feel more confident about investing in both public and private UK companies compared to a year ago, with “value for money in UK equity markets” being the most popular reason. In comparison, a fifth feel “less confident” due to political change as well as potential changes to capital gains tax and business asset relief.
A further third plan to shift cash reserves into both public and private equities if interest rates come down, while fewer than 10% plan to increase cash reserves.
When asked about the impact of a potential increase in capital gains tax, half of all respondents suggested they would invest less in equities than planned, with 7% suggesting they would cease investment altogether.
In a statement, Claire Madden, Founder and Managing Partner at Connection Capital, said: “Private capital investors supported almost 1,500 UK businesses right across the United Kingdom in 2023. 90% of these are classified as SMEs – widely recognised as the engine room of the economy. And total private capital investment reached almost £20.1bn. Private investors are a valuable source of this capital and the current rate of capital gains tax provides an incentive to invest in companies that are not without investment risk.
Many of these companies would struggle to raise capital from traditional sources and therefore any future consideration of changes to the associated tax rates should be aware of the potential impact on this flow of capital.
Furthermore, business owners’ behaviour is often impacted by tax changes – any large increase in CGT rates may reduce their appetite to invest further risk capital in their businesses to fuel growth. Additionally, any exit plans may be delayed in anticipation that rates may come down again in the future.”
Connection Capital provides private professional investors with direct access to private equity transactions and private markets alternative investment funds, which are typically only available to institutional investors. It has raised over £527m of funds as of 31 May, with its portfolio spanning Virgin Wines, Tempcover and 23.5 Degrees, as well as private fund strategies managed by CVC Capital Partners, 17Capital, InvestIndustrial and Enact.
