UK venture capital firms failing to invest in women and minorities, say MPs

Lack of diversity in venture capital investments in the UK

Britain's venture capital industry is failing to invest in companies started by women and minority ethnic entrepreneurs, MPs have said.

Firms with all-female founders received only 2% of venture capital funding in 2021, the Treasury committee was told.

The committee's report found even less investment went to firms led by minority ethnic executives.

Businesses outside London and the South-East of England were also being starved of funding, the MPs said.

Venture capital supports start-ups and other businesses with the potential for rapid growth, typically in exchange for a share of the company.

It is a vital source of funding for tech companies in particular, which often need significant investment in research before they start making a profit.

Sue Daley, from TechUK, which represents major technology companies, said: "It is disheartening to see that women-led businesses are still facing discrimination."

Ms Daley added that technology is a vital tool in addressing many issues the UK is facing now and "it is crucial that women-led businesses are appropriately funded so they can grow and help us address our day-to-day and long-term struggles".

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MPs have called on the government to compel venture capital firms to publish diversity statistics.

Conservative MP Harriett Baldwin, who chairs the Treasury committee, said: "Statistics which show just two pence in every pound of investment goes to all-women led businesses demonstrate a shocking dereliction of duty given the level of government support for the industry through tax reliefs."

She also called on the government to force firms applying for tax reliefs to "reveal their diversity data".

"Government incentives could also be tweaked to encourage more regional venture capital investment," she added.

There is also a geographical imbalance, with 80% of venture capital investment flowing to the "Golden Triangle" of London, Oxford and Cambridge.

London alone is receiving almost half of all equity deals despite accounting for 19% of all small businesses, the cross-party Treasury committee report found.

It takes companies based elsewhere in the UK longer to get access to venture capital investment.

MPs have called on the government to extend tax reliefs which are currently limited to companies that are less under seven or 10 years old.

The move has held back economic growth and innovation, the MPs have warned.

Responding to the committee's report, the Treasury said the number of companies with all-female founders receiving venture capital funds rose from 6% in 2021 to 9% in 2022.

The Treasury's figure comes from the British Business Bank's 2023 Investing in Women Code report, a different source or research to that used by the committee.

The Treasury said they are committed to ensuring that everyone in the UK has equal opportunities to start and run a business "regardless of gender, race or region".