Outlook is brighter, say venture firms

PROSPECTS are looking up for venture capitalists with almost two thirds of them predicting an improvement in the business climate.

The British Venture Capital Association's quarterly Confidence and Attitude survey found that 63% expected trading to pick up in the next three months.

The mood showed a marked rise on the last survey, carried out in October, which showed only half of them expecting business to get better.

The association said: 'The increase in optimism is remarkable. It is a reflection of the fact that the stock market is more favourable to flotations and the fact that we are now in a post-Gulf war environment.'

Just over half of venture capitalists said the level of share prices would be the biggest single influence on business in the coming quarter.

Buoyant share prices help to make business flotations popular with investors. And one of the most straightforward ways for venture capitalists to cash in is by floating a business they have invested in.

Other key factors cited by venture capitalists in the survey were interest rates - raised to 4% last week by the Bank of England in what is widely seen as the first in a series of increases - and the value of the dollar, which has slumped over the past few months.

The growing optimism came after venture capitalists did better in the last quarter of 2003 with 60% reporting the business environment had been 'fairly favourable' or 'very favourable'. A similar proportion - 57% - said they expected investment activity to increase in the next three months.

Only 1% said they expected investment to decline, a dramatic drop from the 10% who in October forecast investment to fall.

The survey covered 147 venture capitalists at 94 different companies and was carried out by research company YouGov.