The Enterprise Capital Funds programme

The ECF programme has been running successfully since 2005. Original approval for the programme was granted by the European Commission and extended by a further 10 years in 2014 to 2024. Following the exit of the UK from the EU, the ECF Programme now runs under the UK Subsidy Control Act. A budget of £1bn was provided to the programme in 2017 and on average investment is made into 3–4 funds a year with a total deployment of between £100m and £150m. The number of ECF commitments made by BBFL is dependent on the nature of the mandates and the quality of proposals made.

Objectives of the ECF programme

The overall aim of the ECF programme is to increase the availability of growth capital to small and medium-sized enterprises (SMEs) affected by the so-called ‘equity gap’, helping to alleviate what would otherwise remain a significant barrier to enterprise and to productivity growth in the UK economy.

Bridging the finance gap: next steps in improving access to growth capital for small businesses first set out evidence of an equity gap facing businesses seeking to raise modest sums of equity finance and presented the Government’s view of the structural causes of this gap. An updated study was conducted in 2009. These documents can be found in Resources.

Context: the equity gap

An equity gap arises where businesses with viable investment propositions are unable to attract investment from informal investors or venture capitalists.

The severity of the equity gap varies according to a number of factors; for example, the characteristics of the business seeking investment (such as its business sector, stage of development and location) can be at least as important as the amount of finance being sought.

This ECF looks to address this equity gap by:

providing public resources for an investment product that encourages an increased flow of private capital into the equity gap; and

lowering the barriers to entry for entrepreneurial equity fund managers seeking to channel finance and mentoring to SMEs, so helping to foster the development of a sustainable skills base in this part of the market.

To ensure the equity gap is addressed ECF’s have a number of key features and restrictions which are detailed in Key Features.

ECF Evaluation

In 2021 the British Business Bank commissioned Ipsos MORI to undertake and interim evaluation of the ECF Programme. The interim evaluation provided supporting evidence of the effectiveness of the ECF programme in meeting its objectives, with the ‘equity gap’ being tackled with increased VC investment into UK early-stage companies and the UK’s VC ecosystem being strengthened by supporting emerging managers to raise funds and become more established investors. 4

Further Information

Alongside the Key Features prospective managers should also familiarise themselves with the Application Process, Assessment Criteria and Fund Administration & Structure information provided.