While a smattering of venture-backed public take-overs have provided a hint of comfort for the City’s top firms in recent months, the flip side of the private equity market – new fund formation – remains a major cause for concern.

The British Venture Capital Association (BVCA) found that funds raised in 2002 fell by 43%. A lot of piled up equity with minimal deal activity has created an overhang of cash, leaving no demand for the formation of new funds.