BVCA report: investment climate improving

09 February 2004

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The British Venture Capital Association has published its fourth quarterly â€˜Confidence and Attitudes Surveyâ€™, which has showed that confidence in the current business climate for investing is mounting. The number of private equity investors who find the UKâ€™s business climate favourable for investment has more than doubled in the last three months, with 63% expecting further improvement in the first quarter of 2004 - an upsurge in optimism compared to October 2003 (50%), June 2003 (37%) and March 2003 (14%). Only 1% of investors expect a decline in economic conditions over the next three months. John Mackie, chief executive, British Venture Capital Association says, â€œPrivate equity backed businesses currently employ nearly 3 million people, or 18% of the private sector workforce. It is therefore good news for not only the private equity industry but the UK economy as a whole, to see that investors are displaying such confidence. The private equity industry has come of age over the last twenty years and our survey demonstrates that it will continue to be a major British success story, of political, economic and social importance to the UK, in this coming year.â€The picture is also encouraging for investee companies, with 66% of private equity investors predicting an improvement in the performance of their portfolios over the next three months. This further displays the overall upsurge in investor confidence compared to last year - October 2003 (51%), June 2003 (46%) and March 2003 (18%). However, the mood is slightly less buoyant with regard to the fundraising climate over the next three months. 56% of respondents expect the climate to stay the same, whilst 41% predict and improvement. This demonstrates a significant improvement in attitudes towards fundraising conditions compared to last year where only 5%, 22% and 31% thought it would improve in a three month period in March, June and October 2003 respectively. Share prices on the Stock Exchange are still widely believed to be the most important external influence on business opportunities, whilst interest rates come a close second. The sterling -dollar exchange rate has also become more significant this quarter, with 33% of investors rating it one of the most important external influences, compared to only 4% three months ago.