More can be done by the government and sector to improve diversity in the investments of Venture Capital Trusts, according to tax expert Lizzie Murray.
Murray is head of the private wealth group at Saffery and advises clients on tax, including the use of VCTs and enterprise investment schemes.
She welcomed the extension of the sunset clause and popularity of the tax-efficient investments but still thought more could be done to increase the amount that goes to businesses led by women and people from ethnic minority backgrounds.
A Treasury report, published in 2023, showed businesses with all-female founders received just 2 per cent of all venture capital funding in 2021, while less than 2 per cent went to black and ethnic minority-led businesses.
At the time, the Treasury committee slammed the sector for an “unacceptable failure” and called for rapid change from the government and the sector.
It also found a lack of investment in firms outside London and the South East.
A year on, Murray believes not much has been done about the issue.
She said: “Nobody at a government level seems to have acknowledged the issue.
“It is great sunset clause has been extended but none of the legislation has been changed.”
Murray said increasing diversity in the venture capital sector as a whole could go some way to addressing the problem.
“There are some quite obvious reasons for [the lack of diversity] in some respects.
“Most people who work in private capital are male, so if you go to meet them about an opportunity you would be faced with a table that does not look like you.
“Of course you can’t replace everybody in venture capital with women or minorities and quotas are always difficult.”
Murray said a start could be raising awareness to underrepresented groups of the opportunities of funding through VCTs and EISs.
“There could be more awareness at a grassroots level.
“We need to think, is there is a way of increasing awareness to these groups of the opportunities in venture capital which could encourage them to apply?
“There is probably a reasonable amount of research on the issue but I don’t know if enough is being done with it.”
Government data from May showed VCTs raised 10 per cent less in 2022-23, compared with the previous year.
However in April data from the Association of Investment Companies showed VCT fundraising was the third highest on the record in the year, despite a 20 per cent drop.
tara.o'connor@ft.com
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