Diversity in gender and ethnicity has been on the rise in the UK’s VC and PE firms since 2021, but representation remains too low, according to an industry report.
A survey carried out by the British Private Equity & Venture Capital Association (BVCA) and Level 20, a nonprofit focused on improving gender diversity in PE, shows that just 11% of senior investment roles at UK firms and their European offices are held by women, up from 10% in 2021. Meanwhile, the proportion of employees that are Asian, Black or from other nonwhite ethnic groups, is 20%—unchanged from 2021.
The survey, which includes data from 268 UK firms and their European offices, found that women now make up 40% of the UK’s VC and PE workforce. Women hold 37% of junior investment roles, up from 33% in 2021.
Despite this increase, 17% of firms included in the survey have no women on their UK investment teams.
Smaller firms in the UK, mostly in VC, have a higher proportion of women in mid and senior investment roles. But these firms also have a higher percentage of all-male investment teams due, in part, to a smaller number of employees and relatively static workforces.
Meanwhile, the lack of ethnic diversity at UK firms is worse when their European offices are excluded. Around 18% of employees at UK offices are Asian, Black or from other nonwhite ethnic groups. For investment roles and senior-level positions that figure falls to 17% and 10%, respectively.
Some 21% of UK firms and their European offices have exclusively white investment teams and 80% of investment professionals defined their ethnicity as white.
Respondents identifying as Asian held the highest proportion of investment roles—outside of white respondents—with 10% of positions, while only 7% of respondents identified as Black or other. Fewer than 30 women in senior-level positions are Asian, Black or from other nonwhite ethnic groups.
“Like many industries, the diversity of the private equity and venture capital sectors do not adequately reflect the diversity of background and experience of the UK population,” BVCA CEO Michael Moore said. “We can—and must—improve. Not only is it the morally right thing to do, but it’s important for the bottom line, too.”
According to a 2020 study by McKinsey, organizations with more diverse teams have 36% better financial returns.
Among the recommendations set out in the report is emphasizing diversity in hiring processes. This includes outreach initiatives to universities and growing awareness of biases through training. Firms should also use new channels for hiring in order to target a wider range of candidates with diverse backgrounds. Including diversity, equity and inclusion in business objectives will also help to promote diversity.
Mentoring is highlighted as a key tool for supporting employees, as well as better family leave policies and practices for all parents.
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