A new government-backed “growth fund” will be created to facilitate investment into UK technology companies, Chancellor Jeremy Hunt says. It will be supervised by the British Business Bank (BBB) and liaise closely with pension funds to increase support for start-ups and other promising businesses.
The fund is one of several measures designed to implement the so-called “Mansion House reforms” to the UK pensions system announced by the government earlier this year. It is hoped that by investing in tech start-ups, pension funds will be able to help promising businesses scale up and deliver better returns for savers.
Speaking ahead of tomorrow’s autumn statement, Hunt said: “Innovation is the key to our future success as a nation and it’s vital that we do all we can to help companies start, scale and grow in the UK.
He said measures to be included in the statement, such as the growth fund, will be “a huge step towards delivering our Mansion House reforms and unleashing the full potential of our pensions industry.”
Focus on spin-outs
The government is also investing £20m to encourage the creation of more “spin-out” companies by universities seeking to commercialise in-house research and will provide £250m to two successful bidders under the Long-term Investment for Technology and Science initiative. These supplementary reforms “are designed to increase investment for the future and help ensure researchers in our world-leading universities have the tools they need to start, scale and grow innovative new businesses in the UK”, a Treasury statement said.
The BBB’s ‘Future Fund: Breakthrough’ programme will receive an extra £50m to invest directly in companies intending to scale up their operations. Founded in 2014 to expand finance to UK small businesses, the state-owned bank made a pre-tax loss of £147m this year after a fall in the value of its tech investments.
These new measures from the government follow an independent review by Andrew Williamson, managing partner of Cambridge University’s venture capital fund Cambridge Innovation Capital, and Oxford University’s vice-chancellor, Irene Tracey, into how to increase the number of successful university spin-out companies. Though UK-based spin-out companies raised £5.3bn in funding between 2021–22, the higher education sector is routinely criticised for its inability to foster an appropriate number of “unicorn” start-ups in proportion to its research clout.
Industry association techUK welcomed the announcement by the government. “This is not just good for the future of the British economy but also good for savers who will benefit from higher returns on their investments,” said its associate director for policy, Neil Ross. “However, as more capital is unleashed, we need to look at initiatives to allow tech companies from across the UK and founders from underrepresented groups to access these funds which could add an additional £41.5 billion to the economy every year, according to the government’s own estimates.”
The government’s new reforms to the pensions system and proposals to more closely coordinate private investment into the UK tech sector bear a striking similarity to those proposed by the opposition Labour Party. As late as last week, Shadow Chancellor Rachel Reeves called for a new public initiative to coordinate investment from pension funds “alongside the British Business Bank…into UK growth assets”, according to the Financial Times. Tech Monitor has contacted Labour for comment on the government’s proposals.