Solving the £1.5 trillion funding gap to boost economic growth, study finds

A leading investment firm has called on the UK to leverage new private capital investment and close the current ‘funding gap’ to accelerate the growth of the economy.

A new report from Lakestar, an investor in companies such as Revolut, says the government could triple GDP growth by attracting £75bn of additional investment each year.

The report called for a total of £1.5 trillion in investment, focused on strategically important sectors including decarbonisation, biotechnology and space over the next two decades.

He argued that attracting a cash injection like this would create up to £7trillion of additional value in the economy and more than three million new jobs.

The calls come as GDP is expected to fall later in 2022 on fears the impact of soaring inflation could translate into a recession.

The UK funding gap report added that traditional banks are being held back by regulation to prevent them from unlocking more large-scale capital investment and said pension funds could be key to accessing more capital of investment.

“The UK already has a vibrant start-up ecosystem,” said Klaus Hommels, founder and chief executive of Lakestar.

“With world-class institutions and incredible entrepreneurs, the next phase of growth can be achieved with an ambitious strategy to scale the businesses of the future.

“The growth of growing businesses over the next two decades would help the UK win in battleground sectors and retain digital sovereignty.”

Sam Gyimah, venture capital partner at Lakestar and former minister for universities, science and innovation, said: “Fixing the UK’s funding gap would put a rocket under GDP growth and usher in a new generation of globally competitive British companies.

“High-growth businesses are the backbone of a successful economy, increasing investment in new industries could create value similar to that of the United States over the past twenty years.”

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