The UK’s Innovation Engine

As Chair of the Venture Capital Trust Association (VCTA) – representing 13 managers controlling over 90% of the UK’s VCT market and £6bn in assets – Chris Lewis warns that weakening policy support could push the UK’s most promising tech start-ups to scale overseas instead of at home.

The UK’s start- up ecosystem doesn’t run on ambition alone – it runs on capital. And for thousands of early-stage companies, that capital comes from VCT. The VCT Association represents 13 of the UK’s largest VCT managers, overseeing more than £6bn in collective funds and accounting for over 90% of the market. Their backing has powered a generation of UK tech firms – not just with funding, but with governance, strategic mentorship, and the infrastructure founders need to scale. But the model now faces pressure. Proposed changes to tax relief and policy support could widen the UK’s early-stage funding gap at a critical moment for AI, climate tech, and deep-tech growth. Survey data from VCT-backed founders paints a stark picture: many say their companies would be smaller – or wouldn’t exist at all – without VCT support. A quarter would even consider relocating abroad.

In this interview with Entrepreneur UK, Lewis discusses whether the UK risks losing its next wave of tech champions, how VCTs are shaping scale-ups beyond capital alone, and why stable, long-term policy could determine whether the UK remains a global innovation leader — or watches its start-ups grow elsewhere.

Is the UK at risk of losing early‑stage tech companies if the VCT framework isn’t strengthened?
The risk is both real and measurable. In the latest independent survey of VCT‑backed founders, a quarter told us they would consider moving their headquarters abroad if VCT support were weakened, and two‑thirds said they would be forced to seek funding elsewhere. More fundamentally, 91% said their business would be smaller without VCT funding, and more than one in four believe they simply would not exist today without it. If we don’t modernise and strengthen the policy framework for VCTs, we risk watching some of the UK’s most promising early‑stage tech companies scale internationally instead of here at home.

Where are VCTs making the biggest difference in scaling British tech today?
The biggest positive impact of VCTs isn’t just through the capital they provide, but the entire ecosystem they help build around founders. In the survey, 79% of founders credited VCTs with enabling them to hire senior talent and specialist advisers, 77% highlighted improvements to their financial reporting and governance, and nearly two‑thirds said VCTs provided mentoring that materially shaped their strategic decisions. More than half said VCT involvement accelerated their product development or R&D roadmap. This combination of both financial and holistic support is exactly what we need to help British tech companies scale quickly and sustainably at home.

What would the immediate impact be on UK startup funding if the current policy support were withdrawn?
Proposed cuts to upfront tax relief would increase the funding gap which, over time, risks shrinking the size of our tech and innovation economy at the very moment we need it to accelerate. The impact would be quite stark. Founders told us that if access to VCT funding were limited, 62% would have to scale back their growth plans almost overnight, 45% would reduce headcount, and two‑thirds would be pushed into seeking alternative funding in an already competitive landscape. Perhaps most worrying, one in four said they would consider relocating abroad.

Are UK tech founders becoming too reliant on VCT capital?
It’s worth noting that there remains a substantial gap across the UK funding ecosystem, of which the VCT scheme is one (albeit a critical) part that supports early-stage companies as they scale. What our survey data shows is not over‑reliance, but the importance of effective partnership at the right stage. While 90% of founders are satisfied with VCT investment terms, the majority of them will also pursue other forms of capital as they mature. VCTs help companies get to the point where institutional investors, later‑stage VCs, and strategic partners are willing to engage. In fact, 59% of founders told us VCTs directly supported them in preparing for a future exit, acquisition, or follow‑on funding round. So, rather than creating dependency, VCT investment strengthens a company’s ability to diversify its capital sources later on.”

What early signals are you seeing from the VCT‑backed company survey about the future of UK tech growth?
The signals show both enormous potential and a clear warning. On the positive side, 68% of founders say VCT funding is ‘extremely important’ to their growth. We’ve seen firsthand what this kind of early backing can unlock: companies like the Beauty Tech Group, which secured its first institutional capital from a VCT while it was still loss‑making and generating under £7m of revenue, went on to scale internationally and ultimately list on the London Stock Exchange at a £300m valuation. Younger companies are especially growth‑hungry as 81% of firms under five years old supported raising VCT investment limits, which we were pleased to see implemented in the Autumn Budget. However, nearly half of all founders, and almost two‑thirds of younger ones, remain worried about potential cuts to VCT tax relief. Their concern is understandable: without stable long‑term incentives, the next wave of high‑potential businesses may struggle to access the patient capital that enabled today’s success stories. There is a huge opportunity here, but only if policy keeps pace with the ambitions of the sector.