Gordon Brown, the Chancellor of the Exchequer, has announced an injection of #240 million venture capital to aid innovation in the UK IT industry.
Last year, venture capital lent to UK companies reached #1.6 billion, compared to #36.7 billion in the US. According to Brown, lack of venture capital has slowed the uptake of British technical innovations.
"In Europe, the conversion of new innovations into new products, especially in the high-tech areas, has been hampered because it can take years to get a company listed and investors have been unwilling to take risks," Brown said. "Also there are too few of the clusters of hi-tech activity that there are in the US, and there is too little support for start-ups."
Addressing the Venture Capital Conference last week, Brown announced a #120 million regional development fund set up by Baring Private Equity Partners, in collaboration with ING Bank and the European Investment Bank.
In addition, a #100 million fund established by UK venture capital company Advent will be aimed specifically at start-ups and young high-tech firms.
Four-fifths of the money will go to the UK. The Midland Bank and the European Investment Bank will provide a further #20 million support for the Midland Enterprise Funds.
"This funding will do much to encourage initiative among businesses seeking to launch new ideas and new products, supporting them in the vital early stages of development and giving them greater confidence to enter highly competitive market places," Brown said.
Mike Stevens, UK head of management buy-out services for consultancy firm KPMG, argued that there is not necessarily a lack of venture capital in the UK, but said the announcement was an important signal from the government.
"The government is showing a greater appreciation of venture capital, which is good economically," he said. "IT companies do not need much money to start up and grow, but they do need marketing skills and a focus on client needs."
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