Survey shows reluctance to avail of venture capital

A new survey has shown Northern Ireland companies lag behind their UK counterparts when it comes to making use of venture capital funding.

The Quarterly Economic and Business Review, which is published by First Trust Bank, reveals that while venture capital has become an established source of business development for firms throughout the UK, Northern Ireland represents only 0.6 per cent of the total venture capital investment for the UK as a whole.

The report goes on to analyse the reasons behind this failure to utilise venture capital, and pinpoints the "generous" approach used by the province's economic development agencies when allocating financial assistance to local businesses, thus creating a situation where such firms "run shy" of considering venture capital as a viable source of funding.

Mike Smyth, the author of the review, explained that while Invest Northern Ireland's decision to create a public-private venture capital fund was a step in the right direction, there were still a lot of questions that needed to be answered.

He added: "With the use of selective financial assistance here set to diminish, what sources of corporate finance will fill the gap? Will venture capitalists in Great Britain or in Dublin be in a rush to invest in NI businesses? Will the banks step in to fill part of the gap left by declining state assistance?"

However, the rest of the report painted a slightly brighter picture of events for the future, with employment on the up and GDP likely to grow by 3.5 per cent by 2003, as the local economy weathers the worst of the global economic downturn. (CL)