VCTs: a 30-year legacy
Managers look back over 30 years of VCTs and consider the future
This year, the venture capital trust (VCT) scheme is celebrating its 30th birthday. Over the past three decades VCTs have played a crucial role in supporting high-growth businesses, fostering innovation and driving economic growth across the UK. From their inception, they’ve offered investors a unique blend of tax advantages and access to early-stage businesses with high growth potential. As we celebrate this milestone, what role will VCTs play in fostering the next generation of groundbreaking UK businesses?
To discuss these questions, a media roundtable was hosted on Tuesday 25 February by the AIC featuring James Hendry, Investment Director of Gresham House Ventures which manages the Baronsmead VCTs, Peter Dines, Managing Director of Mercia Ventures which manages the Northern VCTs, and Robert Whitby-Smith, Partner of Albion Capital which manages the Albion VCTs. Their comments are collated below together with remarks from other industry leaders. Comments from other VCT managers can be viewed here.
Richard Stone, Chief Executive of the Association of Investment Companies (AIC), said: “VCTs are celebrating 30 years of supporting the UK’s most ambitious smaller companies. They have generated thousands of jobs and boosted economic growth across innovative sectors like tech and healthcare. Uniting capital from private investors with the expertise to find and develop cutting-edge businesses has helped VCTs become a great British success story. A number of companies that are household names have been backed by VCTs.
"VCTs are celebrating 30 years of supporting the UK’s most ambitious smaller companies. They have generated thousands of jobs and boosted economic growth across innovative sectors…"
“VCTs have provided British private investors with a tax-efficient way to support the country’s entrepreneurs and fast-growing businesses. From small beginnings 30 years ago, there are now 45 VCTs managing £6.3 billion of assets.”
Chris Lewis, Chair of the Venture Capital Trust Association (VCTA), said: “Over the last three decades, VCTs have become a fundamental pillar of the UK’s innovation economy, consistently delivering capital to the most ambitious, high-growth businesses that drive productivity, job creation and technological progress.
“Traditionally, it has been difficult for retail investors to gain access to those investments and VCTs have offered a unique route to backing a portfolio of these high-growth companies, alongside the opportunity to invest in portfolios of AIM-listed companies.
“VCTs provide exposure to sectors in which the UK has become a world leader, such as fintech, life sciences and AI. These emerging sectors can be built into a diversified offering for investors, making them an attractive proposition. By combining tax-efficient investment with exposure to dynamic, high-growth businesses, VCTs have continued to attract strong investor support, reinforcing their position as a mainstream investment option.”
James Hendry, Investment Director of Gresham House Ventures, which manages the Baronsmead VCTs, said: “VCTs have been highly successful in the UK for a number of reasons, notably the attractive tax incentives to encourage investment in growth businesses. They have also delivered strong long-term returns for investors, driven by investments in high-growth sectors such as technology, healthcare, fintech and consumer. Despite some rule changes, the UK government has maintained a supportive stance towards VCTs, ensuring their continued attractiveness to investors.
“VCTs have evolved to navigate economic downturns, regulatory changes and shifting investment trends, ensuring continued relevance in the market.”
“VCTs have evolved to navigate economic downturns, regulatory changes and shifting investment trends, ensuring continued relevance in the market. Over time, financial advisers and wealth managers have increasingly recommended VCTs as a tax-efficient investment strategy, expanding their popularity.”
What types of companies are you investing in and why?
Robert Whitby-Smith, Partner of Albion Capital, which manages the Albion VCTs, said: “Our investment approach is to identify where technological innovation can address key challenges facing the world and redefine the future. We therefore target opportunities within software, healthcare and deep tech, as we believe these offer the greatest return potential for all our stakeholders.
“We focus on companies offering mission critical software to businesses (rather than consumers), tackling long-term structural challenges and which operate in big markets with potential to scale globally. All this makes them less sensitive to economic tides. Underpinning everything is the need for us to identify true visionary founders with domain expertise and bold ambitions because, while we invest in companies, it is the people who lead them that can determine that business’s success.”
Peter Dines, Managing Director of Mercia Ventures, which manages the Northern VCTs, said: “Despite economic uncertainty, the Northern VCTs remain focused on investing in high-potential businesses with strong fundamentals, innovative propositions and scalable models. Our approach spans multiple sectors, with software and AI presenting significant opportunities as demand accelerates. Health and life sciences remain a priority, driven by an ageing population, increasing healthcare needs and advances in medical technology. We continue to back consumer-facing businesses that demonstrate resilience and strong customer engagement, particularly those with digital-first or subscription-based models. The UK’s rich research base also makes deep tech a key focus, supporting companies commercialising breakthroughs in clean energy and advanced materials.
“Despite economic uncertainty, the Northern VCTs remain focused on investing in high-potential businesses with strong fundamentals, innovative propositions and scalable models.”
“Market challenges persist, but we continue to see outstanding businesses emerge. With a long-term investment approach, we back ambitious management teams and provide the capital needed to scale high-growth ventures.”
What’s the current appetite for VCT investment?
Chris Lewis, Chair of the Venture Capital Trust Association (VCTA), said: “Despite market volatility, investor confidence in VCTs remains strong. VCTs raised £882 million last year, marking the third-highest total on record and a clear indication that investors recognise the long-term value of VCTs in delivering access to the UK’s most exciting growth companies. While broader economic uncertainty persists, the demand for VCTs continues to reflect their role as a stable and established investment vehicle. Investors remain drawn to the combination of growth potential, diversification and government-backed tax incentives, reinforcing VCTs as a key mechanism for funding UK innovation.”
“VCTs raised £882 million last year, marking the third-highest total on record and a clear indication that investors recognise the long-term value of VCTs in delivering access to the UK’s most exciting growth companies.”
What economic and social benefits do VCTs provide?
Chris Lewis, Chair of the Venture Capital Trust Association (VCTA), said: “With more than 20 regional offices in 15 towns and cities, VCTA members are investing in companies based across the length and breadth of the UK, supporting the government’s desire to level up the economy by creating local jobs and supporting communities. VCTs have a proven track record of stimulating well-paid jobs in innovative, fast-growing industries across the UK, delivering on the government’s intention to level up regional economies outside of London and the Southeast. Currently over 106,000 people are employed by firms backed by VCTA members across the UK, earning significantly higher-than-average salaries.”
Robert Whitby-Smith, Partner of Albion Capital, which manages the Albion VCTs, said: “VCTs which back UK innovation to address the key challenges facing the world, including AI, healthcare, the energy transition and defence, naturally align with economic and social benefits and government priorities.
“Albion’s own portfolio has created over 4,600 jobs, helped power some 7,400 UK homes with renewable energy and improved the outcomes of over 700,000 patients.”
“Albion’s own portfolio has created over 4,600 jobs, helped power some 7,400 UK homes with renewable energy and improved the outcomes of over 700,000 patients. As a VCT manager, Albion has also played a role in supporting more female participation in the ecosystem through the launch of our Radia programme.”
Peter Dines, Managing Director of Mercia Ventures, which manages the Northern VCTs, said: “Beyond financial returns, VCTs play a vital role in driving innovation, creating jobs and supporting businesses that might otherwise struggle to access growth capital. Our portfolio companies have increased their headcount by 45% during our investment period, helping to fuel employment growth and skills development across the UK. Unlike many traditional investors focused on London and the Southeast, we back businesses nationwide driving economic diversification.
“We actively support underrepresented founders, recognising the need for greater inclusivity in venture capital. Many of our portfolio companies are also tackling some of the most pressing environmental and social challenges. One example is Promethean Particles, a climate tech innovator that has raised £8 million in a funding round co-led by Mercia Ventures and Aramco Ventures. The company has developed a unique continuous flow process to produce metal-organic frameworks (MOFs) at an industrial scale – materials that are crucial in applications such as carbon capture, biogas upgrading and water harvesting. Their technology makes gas capture, particularly carbon dioxide removal, far more efficient than traditional methods, with applications across multiple industries.
“This investment will allow Promethean Particles to scale up production and accelerate the commercialisation of MOFs. It is just one example of how VCT funding goes beyond financial backing, supporting companies that are creating real-world impact while driving long-term economic and social progress.”
