Moray Wright, CEO of Parkwalk, has called for action from government and UK investors, after data reveals challenging economic conditions have significantly impacted investment into cutting-edge UK companies.
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Concept of decline in investment
A report published from Parkwalk, a UK investor into spin-outs, and analytics firm, Beauhurst, shows the total amount invested in UK spin-outs fell year-on-year in 2022, and looks set to fall again in 2023.
It is the first consecutive period of decline in over a decade of strong growth which has seen over £13 billion of investment secured by UK spin-outs.
It reflects testing economic conditions which have driven up the costs of borrowing and impacted investors’ risk appetite over the last 18 months.
Despite this, 2022 set a new record for the number of deals secured by UK spin-outs, at 414, just up on 2021 levels. Total funding raised during 2022 also remained well above pre-pandemic levels at £2.3 billion.
Moray Wright, CEO of Parkwalk said: “While global economic headwinds have impacted the performance of UK spin-outs, 2022’s record number of deals is a testament to world-leading innovation coming out of UK universities.
“Growing political support for unlocking for the full commercial potential of the UK’s science base, gives cause for optimism, but the job is not yet done.
“More must be done to encourage UK investors to back spin-outs, such as through the Enterprise Investment Scheme, to ensure more founders can access the funds needed to grow in the UK.
“I’m confident the spinout sector will continue to offer investors strong returns, whilst providing solutions to the greatest challenges facing us and future generations.”
Notably, levels of foreign investment into UK spin-outs during 2022/23 reached a new peak, with over 10% of total funding into UK spin-outs coming from foreign investors for the first time on record.
Parkwalk is seeking to ensure existing incentive schemes such as the Enterprise Investment Scheme (EIS) and R&D tax credits continue. These, alongside other measures, are key to channelling more British investment into spinouts and other early-stage science-based companies.
The call for action comes ahead of the outcome of review into UK spinouts, which was commissioned by the government earlier this year to look at how best to support the commercialisation of the world-leading research and development taking place in UK universities and research centres.
The annual “Equity Investments into Spinouts” report, now in its fourth year, highlights especially strong performance from spinouts in:
- Life sciences – which continue to thrive, making up the highest proportion of deals and securing four of the six highest value deals during 2022/23
- Artificial Intelligence – for which investor interest remained strong, with a total of 52 deals in 2022/23 alone.
The report also found Parkwalk was again the number one investor into spinouts by number of equity deals during 2022/23.
Parkwalk is a subsidiary of IP Group, which is an active investor in UK science and technology, and has been vocal in its support of the UK government’s ambitions to become a science superpower by 2030, including the proposed Mansion House reforms.
