Companies backed by Rishi Sunak’s £1.1bn Covid tech fund are raising less funding and going bankrupt at a faster rate than rival firms, raising questions about whether the scheme will net a profit for the taxpayer.
An analysis of the Future Fund by accounting firm RSM found that the 1,191 companies that received taxpayer loans under the scheme grew more slowly than a control group of peers.
The £1.1bn fund, set up when Mr Sunak was chancellor, was praised for helping loss-making start-ups stay afloat during a pandemic credit crunch in 2020.
However, a string of failures and worsening funding conditions has led to questions about the scheme.
It has also left the taxpayer holding stakes in an unorthodox portfolio of companies including a sex party organiser, a toilet seat maker and Bolton Wanderers football club.
The RSM report, commissioned by the British Business Bank (BBB), which manages the fund, said the amount of money raised by Future Fund companies had fallen by 22pc in 2022, while a “counterfactual” group of similar companies not backed by the scheme grew funding by 4pc.
While 92pc of the Future Fund companies were still in operation, 97pc of the control group were.
Over 2021 and 2022, Future Fund companies grew revenue by 16pc on average, half as fast as the 34pc rate enjoyed by the counterfactual group. Valuations also grew at a slower rate.
Future Fund companies outperformed the control group on some measures. For example, they grew faster in 2021 before performance deteriorated last year, and have invested more in research and development.
The report called the results a “mixed picture” and said it was too early to judge the success of the fund.
It said that one explanation for the difference could be the Government’s unclear long-term intentions for its stakes, which could put off investors.
A British Business Bank spokesman said: “According to the early assessment, turnover growth and employment growth were on average lower for the Future Fund portfolio group compared to the counterfactual group, although it is still early for impacts to feed through and this could be an indication that companies were instead focused on fundraising or R&D. A slightly lower proportion of portfolio companies survived compared to the counterfactual group but this result is only weakly significant.
“As venture capital is long-term term investment, it is far too early to give an indication of the overall Future Fund portfolio performance, however due to its size, and the commercial nature of the third-party investors, we expect it to track the market over time.”