VENTURE capitalists in the UK are confident the worst of the downturn is over, and this should drive deal activity in the coming months, according to a new survey published today.

A quarter of the venture capitalists surveyed by accounting firm Deloitte & Touche expect the economic climate to improve in the next six months, with just 13 per cent anticipating conditions will deteriorate further.

This is the first upturn in venture capital sentiment to be recorded for a year. Greater confidence about the economy is expected to boost activity, and 66 per cent of respondents expect deal volumes to increase in the next six months.

Ian Steele, head of corporate finance in Scotland for Deloitte & Touche, said: “Vendor and purchaser price expectations are finally converging, with sellers accepting that prices have fallen.”

Companies selling off subsidiaries are expected to provide the most significant source of transactions, according to 47 per cent of those surveyed.

Mr Steele said: “Divestments are partly being driven by banks seeking to reduce their exposure to corporates and partly by institutional shareholders demanding a clearer focus on the core business.

“However, vendor management themselves are realising the benefits of a quick cash deal.”

But the survey found venture capitalists less optimistic about opportunities from family firms. Only 12 per cent of respondents expect these businesses to be a significant deal source, compared with 20 per cent when last surveyed.