The UK’s depth of risk capital is the biggest hurdle for the UK scaleup sector to overcome to fulfil its potential over the coming years, according to experts.

At the launch of the Scaleup Institute’s Scaleup Annual Review 2024 in London last month, expert speakers from across the UK scaleup community discussed the findings of the report, including the current key barriers for scaling businesses.

Speaking as part of a panel discussion, Stephen Welton, non-executive chair of the British Business Bank, highlighted the way the UK’s scaleup ecosystem has changed over the past decade.

He said: “The landscape is very different to 10 years ago. We are moving toward pinpointing on a county basis all the scaleups and future scaleups. Our biggest challenge is do we have enough risk capital? We need to nurture that sense of invincibility among entrepreneurs.”

The issue was also discussed at the event by Sir John Peace, chair of the Midlands Engine, who highlighted the need to ensure scaleups in all areas of the UK have equal access to capital.

He said: “The progress that has been made over the past decade is that all politicians are talking about growth. However, that growth is London-centric – how do we make sure growth is spread wider? We’ve got to be more agile which means getting capital to the right places.”

The Scaleup Institute’s report reveals that although scaleups represent just 0.6 per cent of the UK’s business population, they generate 55 per cent of SME output, amounting to £1.45 trillion annually.

Despite this economic impact, seven in 10 scaleup leaders feel they lack sufficient capital to meet their growth aspirations.

While the report also highlighted that UK scaleups are increasingly on the radar of international investors, particularly from the US, survey results from scaleup businesses showed that 60 per cent believe funding is concentrated in London and the South East.

In the report, The Scaleup Institute outlined a number of recommendations to improve UK scaleup businesses’ access to growth capital, including:

• Continuing initiatives to unlock institutional capital such as National Wealth Fund, British Growth Partnership, PISCES and the Mansion House Compact and ensure a clear focus on how capital is targeted at scaleups
• Ensuring diverse founders and areas across the whole of the UK are connected to investment resources.
• Maintaining and expanding the British Business Bank’s schemes beyond the current spending review, including regional funds, angel programmes, the life sciences investment programme and Future Fund: Breakthrough scheme.
• Expanding the role and scale of Innovate UK and its deployment of innovation capital to innovative, early stage and scaling businesses.
• The UK business taxation system, notably Enterprise Investment Scheme, Seed Enterprise Investment Scheme, Venture Capital Trusts, capital allowances and research and development should be consistent and maintained with better awareness raising and flexibility.

Amin Vepari, business finance and scaleup lead, Lancashire County Council, attended the launch event on behalf of Two Zero. Speaking after the event he said: “Access to growth funding is a key issue for scaleups in Lancashire and this year’s Scaleup Annual Review highlighted this challenge is also being felt across the UK.

“The figures from this year’s report show that our county’s scaleup community is expanding and, in response, Lancashire County Council has increased funding in recent years specifically to help these growing number of scaleups better find and secure the growth capital they need to fulfil their potential.

“We have a number of services including Boost; Lancashire’s Business Growth Hub’s Access to Finance service, fhunded, the recently relaunched Rosebud Finance as well as Two Zero, which has strong links with both debt and equity providers across Lancashire.

“There are some excellent success stories of Lancashire scaleups who have utilised both debt and equity funding in the past couple of years – companies like Fuuse, Secret Garden Glamping and Panache Cruises. We must make sure we continue to shout about these on a national stage to inspire other scaleups and help investors better understand the Lancashire economy and businesses.”