This year marks the 30th anniversary of the Venture Capital Trust (VCT) scheme, a transformative initiative launched in 1995 by then-Chancellor Ken Clarke.
Created to channel private investment into the UK’s thriving small and medium-sized enterprises (SMEs), VCTs have since grown into a cornerstone of the UK’s investment landscape.
From backing tech start-ups to enabling life-saving healthcare innovations, VCTs have delivered on their original promise of fostering entrepreneurship while offering tax-efficient growth opportunities to investors.
The origins of the VCT scheme
Lord Clarke envisioned VCTs as a bridge between private capital and entrepreneurial ambition. His goal was clear: to support small businesses, the backbone of the UK economy, in accessing the funding needed to scale.
Over three decades, VCTs have realised this vision, building a current network of over 1,000 supported businesses and unlocking substantial economic value. Today, these firms employ over 106,000 people, often in sectors that drive future-focused innovation, such as life sciences, technology, and retail.
A three-decade track record
Over 30 years, VCTs have proven resilient through economic cycles, delivering steady returns to investors and distinguishing themselves from the volatility in the wider venture capital sector. Even amidst challenges like Brexit and the Covid-19 pandemic, VCTs demonstrated stability and continuous investment, with fundraising reaching record levels in recent years. The 2023/24 tax year saw £882m raised—an encouraging sign of investor confidence in the scheme’s ability to support the UK’s high-growth businesses during uncertain times.
See also: VCTs: Resilience and future prospects
This funding has provided critical support during scale-up stages, a juncture where many promising firms face the “growth funding gap.” By bridging this gap, VCTs have ensured the UK remains a globally attractive market for entrepreneurship and innovation, even amid challenging macroeconomic conditions.
Current fundraising landscape and outlook
The VCT scheme’s fundraising performance has reflected its adaptability. Despite a slowdown in the wider venture capital market in 2022, VCT investment increased, demonstrating its role as a stable source of funding.
However, challenges remain. Our research highlights that access to patient capital is still a significant barrier for SMEs looking to scale: two-thirds (66%) of decision makers at scale-up companies believe that increasing the availability of venture capital finance would make the biggest difference to supporting entrepreneurs looking to start or grow a business. To continue unlocking growth, the VCTA is continuing to advocate for policy adjustments, such as extending the age and funding limits for eligible companies.
Looking forward, the scheme’s ability to attract investors and navigate economic uncertainty will be key. As new opportunities for exits emerge, the 30th anniversary also represents a milestone for investors and founders poised to realise gains from their long-term commitments.
Continuing Lord Clarke’s vision
As we celebrate three decades of success, the case for expanding the VCT scheme has never been stronger. By increasing its scope to include a broader range of companies and addressing the funding gap, VCTs could deliver even greater economic impact. VCTs offer not only a compelling investment opportunity but also a chance to support UK businesses driving innovation and job creation.
The VCTA remains committed to working with policymakers to enhance the scheme, ensuring it continues to empower SMEs, inspire entrepreneurial ambition in the years ahead, and make a good scheme great. This 30-year milestone is not just a celebration of past achievements—it is a call to action for the future of UK enterprise and UK opportunities.
Chris Lewis is chair of the Venture Capital Trust Association (VCTA)
