Trade bodies and business leaders have called on the government to close the widening growth capital gap for innovative businesses, including those in the fintech sector.
A new report titled ‘The Future of Growth Capital’ highlighted that closing the £15bn difference between the demand for and supply of growth capital – the financing that enables scaling companies to reach maturity – will aid the economic recovery and boost innovation.
The report from Innovative Finance, the ScaleUp Institute and Deloitte in collaboration with the Business Action Council, found that the Covid-19 crisis has led to a widening of the growth capital gap. The gap has increased from between £5bn and £10bn per year, to approximately £15bn in the wake of the pandemic.
The report made recommendations on how to tackle this gap, such as creating a ‘national blueprint for growth’ that delivers a strategic joined-up approach to support economic growth.
“This should be through a tailored and segmented approach to scaling businesses that addresses the UK’s scale-up systemic issues around talent, markets and infrastructure, with a core long-term growth capital strategy tackling regulatory, legal and structural impediments in the short term,” the report read.
The report also called for changes in legalisation to unlock institutional and corporate funding to help close the growth capital gap as well as for the enhancement of the British Business Bank’s regional presence.
The bank’s schemes such as venture debt and regional funds should be expanded into areas not yet covered, like the West of England, the report added.
Furthermore, it recommended the creation of a ‘future opportunity fund’ to help fund economic growth from nascent and developing sectors.
In addition, the report also suggested the expansion of the role and scale of Innovate UK, including amplifying its delivery of research and development capital to the most innovative, early stage and scaling businesses.
Read more: Treasury launches review into fintech sector
“As we reset our economy in the wake of Covid-19, this is the moment to address the growth and innovation-capital gap with long-term policy solutions,” said Charlotte Crosswell, chief executive of Innovate Finance.
“We accept that there is no silver bullet or single policy that can resolve a complex issue. That is why our recommendations spread across different areas and feed into a long-term solution.
“The problem is abundantly clear, and it’s now crucial we make the changes and address it.
“Areas of our growth economy such as the fintech sector – which is full of scaling, innovative companies – are advancing at a rapid pace, and we risk losing an entire generation of vitally important businesses if we don’t make the necessary structural adjustments.”