Private equity and venture capital can drive jobs and innovation, but only if the Chancellor backs her growth message with supportive and consistent policy, says Claire Madden.
I was at the BVCA Summit last week, where the Chancellor’s session was the one everyone was waiting for. With a packed audience of investors, advisers and entrepreneurs, all eyes were on how Rachel Reeves would set out her vision for the role of private capital in driving Britain’s economy.
Rachel Reeves used her platform to underline one word above all others: growth. She emphasised that government cannot generate it alone, that private equity and venture capital are essential to scaling businesses, and that Britain must remain internationally competitive. She spoke about the need for stability in tax and regulation, the consolidation of regulators, and the importance of encouraging capital inflows. She also pointed to a stronger pipeline for IPOs and a recovery in deal activity as reasons to be positive about the UK’s outlook.
These are all welcome signals. Private capital already supports more than 2.5 million jobs in the UK1. Small and medium-sized enterprises account for 99% of British businesses and 60% of employment2. When the Chancellor recognises the role of our industry in job creation and innovation, it matters.
But the way growth was described felt compartmentalised. Workers in one category, entrepreneurs in another, SMEs and private equity-backed companies in their own silos. In practice they cannot be separated. Entrepreneurs create the jobs for working people. SMEs are often the firms backed by private equity or venture capital. Successful exits feed back into the ecosystem, providing capital for the next generation of businesses. Growth is not a set of disconnected boxes; it is one system.
That distinction matters because policy is most effective when it reflects this interdependence. A tax rise that increases the cost of employment may be justified in fiscal terms, but it makes scaling harder for SMEs. A regulatory burden may appear minor in isolation, but can tip the balance on whether a company decides to hire or expand. These knock-on effects cannot be overlooked if growth is the number one mission of government.
Reeves was clear that tax policy itself must reflect the growth mission. Again, the direction of travel is right. But the reality for many businesses is that the cumulative effect of changes such as higher employer National Insurance contributions or rising minimum wage levels is already being felt. Warm words about entrepreneurship ring hollow if the policies in place make it harder to grow, invest and employ.
What businesses and investors need is consistency. Reeves is correct that international capital has choices. Investors compare Britain with other destinations, and sentiment is as important as tax rates or headline regulation. To attract that capital, the UK must send a coherent signal that it is open for business. Right now, the message is mixed.
The BVCA’s own survey of private capital investors shows that 39% view the UK as a good or excellent place to build a business, compared with 20% who do not. A net balance expect to increase investment here in the coming five years3. That is encouraging, but it is also a reminder that there is no room for complacency. Capital can and will flow elsewhere if the environment is not supportive.
The Chancellor’s comments were, in many respects, the right ones. But repeating the word growth is not the same as delivering it. To move from ambition to reality, policy must treat the economy as an interconnected ecosystem rather than a set of separate interests. Entrepreneurs, investors, SMEs and workers succeed together or not at all.
The private capital industry is ready to invest, and appetite for deals is returning. If government ensures that words are backed by consistent and supportive policies, Britain can indeed be the best place in the world to start and scale a business. But growth cannot be boxed off. It must be approached in the round, and every policy must reinforce that ambition.
Sources
- BVCA, Private capital investment into UK business tops £29bn in 2024.
- UK Parliament, House of Commons Library, Business Statistics – Research Briefing SN06152.
- BVCA, Private capital industry sees appetite for IPOs returning, looking ahead to increased deal activity.