The UK’s chancellor of the exchequer, Jeremy Hunt, has confirmed that the British Business Bank will establish an investment vehicle, opening its commercial capability and investment pipeline to pension fund investment.
During his July’s Mansion House speech, the chancellor asked the bank to explore establishing a vehicle that could receive third-party capital such as pension fund investment, making use of the Bank’s track record and market access to a range of promising high growth companies.
Today, the chancellor confirmed that the bank will establish an investment vehicle, opening its commercial capability and investment pipeline to pension fund investment.
This will utilise the Bank’s market access and position as the largest domestic investor in the UK venture capital.
To support this, the growth fund will draw on a permanent capital base of over £7bn. The government has highlighted that industry reaction to this initiative has been positive, with eight pension providers, managing total assets of over £350bn, acknowledging that such a vehicle could be a valuable addition to the market.
The Bank said that it will now work closely with industry on the design of the investment vehicle before announcing further details in due course.
The chancellor also announced a £375m Future Fund: Breakthrough programme is being extended with at least an additional £50m to invest in high-growth, innovative firms.
The programme, delivered by the Bank’s commercial subsidiary, British Patient Capital, makes equity co-investments with private sector investors in growth stage R&D-intensive UK companies operating in breakthrough technology sectors. The minimum total investment round size is £30m.
The maximum Future Fund: Breakthrough share of an investment round is 30%.
Hunt also announced that following a call for proposals for the Long-Term Investment for Technology and Science (LIFTS) initiative, launched by the British Business Bank in May 2023, the Bank is moving into contractual discussion with two successful LIFTS bidders, with the intention of investing a total of £250m, subject to contract.
These proposals would create two new investment vehicles that are accessible to pension fund capital, unlocking over £1bn of total private capital, including substantial defined contribution (DC) pension scheme capital, to support innovative companies in the UK.
Hunt said: “Innovation is the key to our future success as a nation and its vital that we do all we can to help companies start, scale and grow in the UK.
“Tomorrow’s Autumn Statement will be a huge step towards delivering our Mansion House Reforms and unleashing the full potential of our pensions industry.”
Louis Taylor, chief executive officer of the British Business Bank, said that this package of measures has the potential to unlock billions of pounds of additional investment for the UK’s fastest growing and most innovative companies, thereby boosting the economy and driving returns for pension savers.
He said: “With at least £50m more funding for the Future Fund: Breakthrough programme the British Business Bank can continue to support innovative high-growth, R&D-intensive British companies operating in breakthrough technology sectors.
“We welcome these ambitious measures and the confidence the government has demonstrated in the British Business Bank to deliver them.”