06 November 2003

Commission Final Report on Risk Capital Action Plan

The Commission has published its fifth and final progress report on the implementation of the Risk Capital Action Plan. Commissioner Bolkestein said: “The RCAP has got rid of many obstacles to European risk capital markets. But if we want to make Europe the most competitive and dynamic economy in the world we need to break down remaining barriers at European and national level”, and Commissioner Solbes added: “The gap with the USA in venture backed investments is still there but is decreasing.'

Main conclusions from the Final Report are that private equity investment in the EU, including both venture capital and buy-out investment, increased slightly in 2002 compared to 2001. It has only ever been higher in 2000. But there was an important shift towards less risky buy-outs. Investment of venture capital fell significantly compared to 2001 partly in the wake of the bursting of the Internet 'bubble', and was roughly half the level it reached in 2000. Venture capital investment in the US contracted even more severely but was still double that of the EU. Although the situation remains difficult, general economic recovery will allow the European venture capital market to resume growth from a significantly strengthened base.

Building on the RCAP, the Commission will continue to follow the risk capital markets closely. It will further analyse the areas where inefficiencies still remain with a view to putting forward recommendations and proposals, as necessary, on for example:

obstacles faced by institutional investors who wish to invest in venture capital

further improving the regulatory framework including the possibility of creating a harmonised European legal structure capable of ensuring tax transparency all over Europe

fostering exit mechanisms, with special attention to specialised stock exchanges and lists for growing companies, and to boosting investor confidence

closing the information gap between financiers and companies/entrepreneurs seeking investment

focusing EU support on safeguarding the supply of funds for early stage investment and on counterbalancing the effects of the present reduced supply of development stage financing. In the new Member States, full advantage should be taken of the EIF's experience in the establishment of new funds in locations outside financial centres.

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