Rachel Reeves is leading a start up delegation at the World Economic Forum in Davos this week.
The Chancellor should rethink the decision to limit tax incentives for investors who are willing to take the risk in backing UK entrepreneurs via Venture Capital Trusts.
With the UK economy growing by just 0.1% in the quarterly snapshot, it’s clear more funds need to be channelled to fast growing start ups and scale ups.
Among VCT managers included in our research, over a third (36.8%) of their investments are in businesses that have grown revenues by more than 25% year on year.
By contrast, only a tiny minority (2.1%) of the FTSE All Share constituents, excluding investment trusts and insurance companies, had achieved that.
Susannah Streeter, Chief Investment Strategist, Wealth Club, said, ‘’While the latest growth snapshot provided a bit more cheer to blow away the January blues, the underlying performance is a sluggish one, with the UK economy only expanding by 0.1% on a quarterly basis.
“Nurturing the business stars of the future is essential for long-term growth, and there are plenty of British start-ups eager for funding to expand. While it’s encouraging to see Rachel Reeves leading a delegation of start-ups at the World Economic Forum in Davos to showcase fast-growing UK businesses, she should rethink the decision to limit tax incentives for investors who are willing to take the risk in backing them.
“Experienced investors can provide the vitamin boost the UK economy needs by putting their financial weight behind startups via Venture Capital Trusts (VCTs). As well as helping boost long-term growth they help create armies of angel investors and enable them to save tax in the process.
“VCTs currently provide income tax relief of up to 30%, and dividends paid out are tax free. But under plans announced in the Budget, the income tax relief available is reducing to 20% in the next tax year. With some offers filling up fast, investors – particularly any bonus recipients wishing to prevent a massive tax haircut – need to get their skates on.
“VCTs are similar to investment trusts: they are listed on the London Stock Exchange, and were introduced back in 1995 to spur on private investment in small early-stage companies. By investing in a VCT you gain exposure to a portfolio of 30-100 young usually private companies and entrepreneurial talent. They require longer term investment and are riskier than other asset classes, which is why tax incentives are offered, but the rewards can be super-attractive.
“VCT-backed companies tend to be much faster-growing than larger, established FTSE-listed companies. This is proven by our research on the portfolios of the main VCT managers. Over a third (36.8%) of their investments are in businesses that have grown revenues by more than 25% year on year. By contrast, only a tiny minority (2.1%) of the FTSE All Share constituents, excluding investment trusts and insurance companies, have achieved that.
“When rapid growth is assessed (companies growing revenues at over 50% a year) – VCTs fare even better. 18.1% of their portfolios are invested in companies growing revenues at 50%+, compared with just 0.5% (by market cap) for the main market.
If this revenue growth continues, it could translate into increased valuations and more exits – when companies included in a VCT portfolio are sold and the proceeds paid back to the VCT and distributed to investors, usually through enhanced tax-dividends.
It’s worth bearing in mind that private companies tend to track the valuation multiples of their main market counterparts, though usually with a delay. Stock markets have rallied over the past year, but private companies’ valuations are yet to catch up. The reasonable assumption is that they will at some point soon, although it is of course not guaranteed.
VCTs offer the chance to further diversify portfolios, particularly useful in these uncertain economic times, when there are concerns about an AI bubble brewing, particularly across the US tech sector.
Current favourites in the VCT sector include Triple Point, Proven and Albion. By value, 67%, 43% and 41% of their respective investment portfolios are growing at more than 25% per annum.
Triple Point
The Triple Point Venture VCT looks to invest in early-stage B2B companies, with an emphasis on healthcare and software. Launched in 2018 it has grown net assets to £92.6 million, including approximately 60 qualifying companies and £26.6 million held in cash (August 2025). The VCT recorded its first cash exit in 2022, achieving a 5.2x return on cost from Credit Kudos.
ProVen
The two ProVen VCTs – ProVen VCT (PVN) and ProVen Growth & Income VCT (PGI) – are the longest-standing VCTs with a focus on growth investing. Manager Beringea has a particular reputation for backing consumer brands and technology companies. Recent successful exits have included jewellery brand Monica Vinader, acquired by private equity firm Bridgepoint, and advertising technology platform Blis, acquired by LDC.
Albion
Since 2015, the Albion VCTs have focused purely on growth opportunities with a bias towards healthcare technology – particularly the digitalisation of healthcare – financial technology, digital risk, and AI & Data stack sectors. The VCT’s largest holding is anti-fraud specialist Quantexa, which recently became a “Centaur”, having surpassed $100 million in annual recurring revenue.’’
