Call for Greater Coordination between Private and Public sector to address Growth Capital Gap

New report by ScaleUp Institute, Innovate Finance and Deloitte recommends National Growth Blueprint to fill £15bn capital gap to fuel economic prosperity

London, 6 August 2020 – Urgent action is required to close the UK’s growth capital gap, according to a report released today by Innovate Finance, the ScaleUp Institute and Deloitte by accelerating, evolving and expanding existing initiatives under a national framework for growth.

The report, The Future of Growth Capital, stresses that closing the emerging £15bn gap will provide opportunities for aiding the UK’s economic recovery post-Covid, generating future prosperity and boosting regional economies, productivity, innovation and internationalism.

Growth capital refers to the financing that enables scaling innovative companies, both young and established, to reach maturity.

The gap — the difference between demand for and supply of growth capital — stood at £5bn-£10bn a year before the Covid-19 crisis. The pandemic has significantly exacerbated the issue and effectively doubled the gap, with it now reaching £15bn.

The report lays out five specific and practical recommendations to tackle the long-standing, structural problem of a lack of available capital for scaleup companies. The recommendations are: 

  1. Create a ‘National Blueprint for Growth’ that delivers a strategic joined up approach to support and champion more consistent and effective economic growth across all regions and sectors
  2. Accelerate the unlocking of Institutional and Corporate Funding through changes in legislation and organisation that crowds in the existing significant private sector capital that can make inroads into closing the growth capital gap
  3. Expand and build upon the British Business Bank (BBB) by strengthening the regional presence of the BBB with empowered decision making deployed under a national framework, and continue the developments of its products along with Scottish Investment Bank (SIB), Development Bank of Wales and Invest NI
  4. Expand the role and scale of Innovate UK and its direct deployment of innovation capital to our most innovative, early stage and scaling businesses
  5. Create a “Future Opportunity Fund” to develop diverse sectors and impact investing potential that is focused on emerging, socially inclusive markets, including the carbon net-zero economy

There are a number of potential benefits from closing the growth-funding gap and laying to rest the long-term structural issues identified in the report. These include a 10-20% boost in business investment, doubling the number of scaleups in the UK and supporting levelling-up objectives delivered through strong growth across all regions.

The UK’s 33,860 scaleup businesses constitute a critical portion of UK small- and medium-sized enterprises (SMEs) and contribute £1 trillion to the UK economy annually. These scaleups represent 50% of the SME economy and are twice as likely to innovate and have international businesses than their peers.

The UK is the top destination in Europe for FinTech investment and has strong growth in sectors such as life sciences, advanced manufacturing, and media. Although it ranks third in the world for starting a business, it only ranks 13th when it comes to scaling them.

The report looks at what the UK can learn from the targeted support that many of the UK’s international peers have developed for scaleups. The five recommendations draw on lessons from what Germany, Canada and the USA are doing to deploy growth capital to scaleups in their own countries as a means to drive economic revival. This is often also in tandem with structured long-term business support measures.

Irene Graham OBE, CEO of ScaleUp Institute, commented: “Scaleup companies are key to economic recovery. They make a significant contribution across the country in every locality and sector. As this report highlights, even through the Covid-19 period, they remain highly innovative and are still investing in R&D and job creation. As we seek to build back better we must be bold in addressing our scaleup challenges and the widening gap in long term patient capital.

“We believe that the combination of approaches set out in this report can finally solve long standing growth capital issues and make significant inroads to the leveling up agenda. As this report emphasises, the public and private sector must work together in a collaborative effort to deliver the step change required.”

Charlotte Crosswell, CEO of Innovate Finance, commented: “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. 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.”

Richard Kibble, UK Head of Banking at Deloitte, commented: “No one can deny the widespread disruption caused by the Covid-19 pandemic. In the short and medium term, it’s vital that we find new ways to get the economy growing again. However, longer term it also represents a unique opportunity to reset some of the fundamental challenges the UK has faced for quite some time – regional levelling up, diversity, carbon emissions, unemployment – to name but a few.

“We believe therefore that Covid-19 should act as a catalyst for change. Now more than ever it is vital that businesses are encouraged to start and scale up to their full potential. After all, it could be a chance to create a positive and lasting legacy from the upheaval of this crisis.”


Notes to editors

  1. In May 2020, Innovate Finance and ScaleUp Institute were asked to lead working groups, on behalf of the Business Action Council and the Recapitalisation Project, to look at finding strategic finance solutions in support of our entrepreneurs and their businesses in the medium to longer term. This report has been based upon significant joint work with a wide range of stakeholders from business, industry and finance across a broad range of ecosystem participants, including angels, VCs, VCTs, banks, growth capital funds, institutions and the advisory community.
  2. Download the report here:
  3. Read the full recommendations here:
  4. Supporting quotes:

Stephen Welton, Executive Chairman of BGF, commented: “The £15bn growth capital gap is powerfully revealed in this report. It highlights the inadequacy of UK growth capital flows compared to other countries and the rapid deterioration, due to Covid-19, of a long-standing market failure – one that is on course to have a devastating impact on future growth, innovation and job creation.

“The 40 percent retraction in equity investment at the same time as a 43 percent increase in demand puts in plain sight a deeply concerning trend. Urgent, practical action is needed. Key to unlocking this, as the report asserts, is to create confidence for the long term by scaling up the investment vehicles that already exist. There is a significant opportunity for collective growth if this widening gap is fixed, but only if action is taken once and for all by major investors.”

David Hughes, Chief Investment Officer of Foresight Group, commented: “It has been a privilege to contribute to this report. We need a step change in the flow of growth capital into UK businesses. To the well-known growth capital funding gap that has been around for as long as I can remember since working at ICFC in the 70s and 80s, there has now been added a further similar scale funding gap created by the pandemic and lockdown. Our challenge is to take the right steps immediately to fund businesses and protect jobs but importantly to provide much more capital for investment, otherwise the UK economy will face a growing catastrophe and falter. Besides increasing the quantum of growth capital, there are three other critical factors: speed – we need to act immediately to avoid more business failures and job losses as working capital dries up; relax the rules – for a period, we should relax the rules that stifle rather than encourage investment, for example State Aid; and greater financial support for the regions – building on the existing infrastructure to get funding to where it is needed fast. I and my colleagues at Foresight look forward to playing our full part in funding the recovery and growth of UK business.”

Marcus Stuttard, Head of UK Primary Markets & AIM at the London Stock Exchange Group, Comments:

“The UK has a broad universe of high-growth, scaling businesses and a diverse funding environment. However, COVID-19 has highlighted the need for many of these businesses to have better access to a broader source of funding options and, in particular, equity finance. We welcome the recommendations set out in this report and look forward to working with the ScaleUp Institute, Government and stakeholders across the finance community to develop further solutions to ensure the UK recovers from the pandemic and builds on the underlying strengths of the UK economy.”

Maurice Ostro, Chair of the Business Action Council, Comments: “I am delighted that the Business Action Council have demonstrated the benefit of a collaborative ecosystem by coming together with others to deliver such a valuable report.  It’s vital that we work with government proactively on these issues and provide the consensus from enterprise that will help this administration deliver the right support at speed – so that it is effective, sustainable and instils confidence. Access to Growth Capital is crucial and this report provides important evidence and clear recommendations on how this can be taken forward at a critical time for the UK economy. As an entrepreneur, I believe in the importance of scale-ups, which are frequently our most innovative businesses and are thus essential for the UK’s recovery from the crisis.”

Miles Celic, CEO of The City UK, Comments: “This is an extremely important set of recommendations. As we emerge from the Covid crisis it will not be enough to simply recapitalise companies, we will then need to properly support their growth so that they can propel the economic recovery. These proposals set out how government and industry can work together to drive growth and job creation and harness them to the benefit of communities across the whole of the UK.”

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About ScaleUp Institute

The ScaleUp Institute is a private sector-led, not-for-profit organisation focused on collaborating with policy makers, corporates, finance players, educators and government at a local and national level.

Our mission is to help the UK to become the best place in the world to scale a business as well as start one, and enable our existing high-growth businesses to scale up even further.

Scaleup businesses are defined as companies which have increased their turnover and/or employee numbers annually by more than 20 per cent over a three-year period. Nationally, the latest 2018 data from ONS showed that there are 33,860 of these businesses generating more than £1 trillion to the UK economy. The national number of scaleup companies has increased by more than one-third over the past five years. In parallel, we have a generation of scaling businesses who have had a growth incident but have not reached full scaleup status, whose scaleup potential must be encouraged and fostered.

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About Innovate Finance

Innovate Finance is the independent industry body that represents and advances the global FinTech community in the UK. Our mission is to accelerate the UK’s leading role in the financial services sector by directly supporting the next generation of technology-led innovators.

Innovate Finance’s membership ranges from seed stage startups and global financial institutions to investors, professional services firms, and global FinTech hubs. All benefit from Innovate Finance’s unique position as the single point of access to promote enabling policy and regulation, talent and skills, business opportunity and growth, and investment capital.

By bringing together and connecting the most forward-thinking participants in financial services, Innovate Finance is helping create a global financial services sector that is more transparent, more sustainable and more inclusive.

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About Deloitte

In this press release references to “Deloitte” are references to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”) a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see for a detailed description of the legal structure of DTTL and its member firms.

Deloitte LLP is a subsidiary of Deloitte NSE LLP, which is a member firm of DTTL, and is among the UK’s leading professional services firms.

The information contained in this press release is correct at the time of going to press.

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