Financing the real economy

Status / emerging findings

• UK equity investment is concentrated in London/south-east (two-thirds), while women-led businesses receive only 2% of venture capital despite delivering 35% better returns than male-led firms.
• Pension fund equity allocation has collapsed from 40% (2002) to 6% today, partly due to regulatory changes post-2008 and retail investment advice becoming unaffordable (£430 billion in uninvested retail cash).
• SME lending has declined 85% (overdrafts fell from £18bn in 2000 to £2.7bn), with a £65 billion gap versus pre-crisis trends; growth guarantee schemes operate at 0.05% of GDP versus 0.2% in the US.
• AIM has declined to 20-year lows with two-thirds of companies sub-£100 million market cap; tax uncertainty and audit affordability are deterring smaller companies and investors.
• Government witnesses (Lord Stockwood, British Business Bank) disputed problem severity in December 2025 hearing, arguing good businesses can access capital and US relocation reflects market size rather than finance constraints.

Why it matters

The UK's ability to grow high-value businesses and invest in infrastructure depends on whether £3 trillion in savings can be unlocked for domestic investment; current evidence suggests structural and regulatory failures are pushing growth companies and capital toward the US instead.

Tone arc

Inquiry began with broad diagnostic questions about capital flows in autumn 2025; shifted from cooperative exploration of sectoral barriers (pensions, housing, infrastructure) to sharper contestation in December final hearing, where government officials directly challenged the committee's framing of 'severe constraint' on scale-up finance.

Key witnesses

Lord Stockwood (Office for Investment), Blair McDougall (British Business Bank), Oliver Coppard (South Yorkshire Mayor), Debbie Wosskow OBE (Invest in Women Taskforce), Tim Creed (pension/institutional investment sector), Richard Davies (British Business Bank), James Ashton (AIM companies representative), Rob Salter-Church (National Grid)