Due to the pandemic, our economy is in recession. There are many businesses that are struggling to stay afloat. The economy and businesses need investment and support, however, due to the general contraction of the economy, there will be limited capital available.
The private sector (VC Funds, PE Funds, Angel Investors) have also been affected by the pandemic, and will have limited supply. They will not decide to support every single business that is certain to bounce back or start-up that solves a legitimate market need or problem. As a result the demand will outstrip supply and the market will become condensed and less competitive as private actors look for lower risk and invest in industries that will always be safe such as supermarkets & online businesses, rather than the higher risk innovative ideas and businesses in sectors such as sustainable energy and retail.
In a higher growth period of time, the government would offer support, grants and loans. However, after an extensive furlough period, the level of governmental debt is extremely high. Any public investment will be going into HS2, education and healthcare, not risky grants and loans to fledgling businesses. Nonetheless, the need for investment into key industries such as travel will be key to the economy’s recovery. We need to find a way to enable investment in an economically sustainable way to limit the growth of our deficit