The British Business Bank has been tasked by the government to establish the British Growth Partnership, with the first investment expected by the second half of 2025.
The British Business Bank will create a new vehicle, subject to regulatory approval, to crowd-in UK pension fund and other institutional investment into venture capital funds and innovative businesses, supported by a cornerstone government investment.
Investments from the fund will be made on a long-term, fully commercial basis, independent of government, leveraging the Bank’s capability and market access to a range of promising high-growth UK companies.
The British Business Bank said that over the coming months it will seek to raise hundreds of millions of pounds of investment for this model, with the aim of making investments by the second half of 2025.
Reforms
The government will also implement reforms to the British Business Bank’s financial framework that will increase the Bank’s impact and its ability to respond flexibly to the market, including putting the Bank’s £7.9bn (€9.5bn) commercial programmes on a permanent footing.
Making the capital base of the Bank’s commercial programmes permanent will allow the Bank to re-invest its commercial returns over the long term, catalysing more capital into UK companies. It will also allow the Bank to deploy its capital in a more flexible way using its full range of capabilities to support the government’s missions and the delivery of its Industrial Strategy.
LIFTS
The British Business Bank recently awarded £250m under the Long-Term Investment for Technology and Science (LIFTS) initiative to Schroders Capital (£150m) and ICG (£100m), who will create two new investment vehicles that are accessible to pension fund and other institutional investment.
This will be supported by £250m of pension investment from Phoenix Group, and together these investments are expected to generate over a billion pounds of investment into UK science and technology companies.
Following approval by the Financial Conduct Authority of Schroders Capital’s first Long-Term Asset Fund (LTAF) dedicated to UK venture capital last month, both successful LIFTS bidders, Schroders Capital and ICG, are expected to begin making investments via their new vehicles in late 2024.
Louis Taylor, chief executive officer of the British Business Bank, has welcomed the government’s announcement saying that these companies have the potential to “drive productivity, jobs and growth, and will support the UK to be internationally competitive in the industries of the future”.
He said: “By unlocking hundreds of millions of pounds of domestic investment for the UK’s high-growth businesses through the creation of the British Growth Partnership, the UK can capture the full commercial potential of its world class breakthrough technology companies, providing a legacy for future generations of pensioners.”
Taylor also welcomed the announcement to implement a set of reforms to the Bank’s financial framework.
He said: “This announcement is a strong endorsement of the British Business Bank’s 10-year track record, market access and capabilities including our position as the UK’s largest domestic investor in venture and venture growth capital and the most active late-stage investor in UK life sciences and deep tech.”
Julia Hoggett, CEO of the London Stock Exchange, said: “It is critically important for the growth of the UK economy that homegrown companies are able to access the investment they need to grow, scale and stay in the UK.”
She added that access to meaningful UK capital at the scaling phase has been a long-recognised challenge and welcomed the fact that the British Growth Partnership is being established to help address this problem.
“This will also facilitate more investment by UK pension schemes into scaling UK companies, providing greater returns for their savers and giving UK investors a greater stake in the UK economy,” she noted.
Nicholas Lyons, group chair at Phoenix, added that the UK needs scale and skills to “convert our brilliant science and technology start-ups and university spinouts into the successful and sustainable companies of tomorrow”.
He said: “The British Growth Partnership will complement the private sector DC pension industry’s undertakings under the Mansion House Compact to expedite this, directing investment to deliver the best returns for our pension savers.”
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