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.

Growth Fund

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.”

By UKBAA 21 Nov 2023