British Business Bank responds to the Chancellor’s latest Mansion House Reforms announcement
The British Business Bank welcomes the announcement by the Chancellor of the Exchequer, the Rt Hon Jeremy Hunt MP, outlining the next steps on a package of measures to unlock pension fund capital and allocate it towards productive UK investment. The Bank looks forward to playing its part in delivering on this important agenda. The Government has also extended the Bank’s backing for investments in high growth and high potential life sciences and deeptech companies.
Long-Term Investment for Technology and Science (LIFTS)
Following a call for proposals for the Long-Term Investment for Technology and Science initiative, launched by the British Business Bank in May 2023, the Chancellor announced that the Bank is moving into contractual discussions 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 DC pension scheme capital, to support innovative companies in the UK.
At 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.
In today’s announcement, and following engagement with industry, the Chancellor confirmed that the British Business 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 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 will now work closely with industry on the design of the investment vehicle before announcing further details in due course.
Future Fund: Breakthrough
Finally, the Chancellor announced that the £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%.
Louis Taylor, CEO, British Business Bank said:
“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.
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.”
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Notes to editors
The Government has highlighted positive industry reaction to the Growth Fund announcement, including a statement supported by eight pension funds. We reproduce that statement in full below:
‘The British Business Bank has engaged widely with the market to explore the case for government to play a greater role in establishing investment vehicles to allow pension schemes to invest quickly and effectively in UK unlisted growth companies, building on the skills and expertise of the Bank’s commercial arm.
The eight organisations, listed below, have confirmed that they are supportive of the Government’s ambitions to encourage additional institutional investment into UK venture and growth assets, and that a Government-established vehicle run by the British Business Bank could be a valuable addition to the market, alongside other vehicles that already exist or are in development.
They have also confirmed their availability for continued engagement with the British Business Bank to help design this vehicle to meet schemes’ needs, alongside the wider work of government and the market to establish suitable vehicles.
Aegon, Aon, Aviva, L&G, M&G, Phoenix, Smart Pension, and USS.’
About the British Business Bank
The British Business Bank is the UK government’s economic development bank. Established in November 2014, its mission is to drive sustainable growth and prosperity across the UK and to enable the transition to a net zero economy, by improving access to finance for smaller businesses. Its remit is to design, deliver and efficiently manage UK-wide smaller business access to finance programmes for the UK government.
As well as increasing the supply and diversity of finance for UK smaller businesses through its programmes, the Bank works to raise awareness of finance options available to smaller businesses. The British Business Bank Finance Hub provides independent and impartial information to businesses about finance options, featuring short films, expert guides, checklists and articles from finance providers to help make their application a success.
The British Business Bank is also responsible for administering the government’s three Coronavirus loan schemes and its Future Fund, together responsible for delivering £80.4 billion in finance to 1.67 million businesses. These schemes are now closed to new applications.
British Business Bank plc is a public limited company registered in England and Wales, registration number 08616013, registered office at Steel City House, West Street, Sheffield, S1 2GQ. Wholly owned by HM government, the Bank and its subsidiaries are not banking institutions and do not operate as such. They are not authorised or regulated by the Prudential Regulation Authority (PRA) or the Financial Conduct Authority (FCA). A complete legal structure chart for the group can be found at the British Business Bank.