The British Business Bank | investing for the long term

As part of the series “investing for the long term” we spoke to Wyndham North, Policy and Strategy Director on how the British Business Bank is unlocking growth in the UK. The British Business Bank is a UK government-owned bank that operates independently and co-invests with partners such as venture capital funds to back innovative UK companies, unlocking their potential and driving growth across the country.  

Tell us about how the British Business Bank is supporting the UK for investing for the long term?

Investing for the long term is at the core of what we do. We are the largest UK investor in domestic venture capital. And as part of that, we work extensively with other private sector and institutional investors to leverage their investment alongside us. We are currently supporting equity finance of £7.4bn to 2,130 businesses through our programmes. So the Bank, at its core, is playing a pretty central role in supporting innovation through equity investments. We’re working really closely, as part of that, with other investors.

Can you tell us more about how you are helping to unlock institutional pensions investment for high growth sectors in the UK?

We are working closely on the Long-term Investment for Technology and Science (LIFTS) initiative with HM Treasury and the Department for Business and Trade. We have sought proposals from industry for the establishment of new funds or investment structures, to crowd in UK institutional investment, particularly Defined Contribution (DC) pension funds. The unlocked investment will support the growth and ambitions of the UK’s most innovative science and technology companies. The aim of LIFTS is to effectively stimulate the presence of more vehicles in the market that will be suitable for making more investment. We do recognise the historic underinvestment by pension funds into UK venture capital (VC) and we can see you (the City) have written about this. LIFTS is saying to the market, we’re here to back you. Working with the government we will make up to £250m of support available. Critically, we are encouraging this to be a collaboration between VC firms and pensions funds.

We can’t say more than that right now. But this initiative sits alongside the Mansion House Compact. If funds are going allocate 5% of their allocations to unlisted equity, well this is a means of trying to help them do that in a way that supports long term growth. The British Business Bank and our subsidiary British Patient Capital in particular, were set up to support investment in high growth companies and a big part of that is in high growth sectors such as science and technology.

What else are you doing to increase access for pension savers to high growth companies?

At the recent Mansion House speech, alongside the package of measures to unlock UK pension fund capital, the Chancellor asked us to consider opening up the Bank’s pipeline of pension funds investment into growth companies. That means establishing an investment vehicle for pension funds to enable them to invest through the British Business Bank. So, we are engaging the market with lots of conversations. The question is whether there is appetite for the Bank to play an increased and more active role in giving pension funds access to UK VC. But also UK private debt, which is a significant area of investment for us. We are currently rolling out the second generation of those, to the tune of £1.6bn. It will be for the government to decide the way forward on this, informed by our market engagement. And from a policy perspective, we can see the City of London Corporation’s report Vision for Economic Growth – a roadmap to prosperity has highlighted the supportive voices for the work of the Bank.

What other initiatives do you have in place to foster investment in UK high-growth industries?

Our Life Sciences Investment Programme is a £200m programme managed by British Patient Capital designed to address the growth equity finance gap faced by high-potential UK life sciences companies. Through LSIP, we make cornerstone commitments to later stage life sciences venture growth funds with a strong UK focus.

We also have a programme called Future Fund: Breakthrough. Through this programme, managed by British Patient Capital, we directly back some of the most innovative high growth firms in the UK and encourage investment from private investors. The £375m programme again includes some great investments for example in UK R&D intensive industries. We’re helping investors access ground-breaking businesses and the funding we deliver is driving innovation and growth in the UK.

The British Business Bank is an important player in the UK’s venture growth ecosystem. As part of the pensions reforms, the Bank is exploring the case for government to play a greater role in establishing investment vehicles, drawing upon its skills and expertise, to ensure that money unlocked by these reforms is invested quickly and effectively. The Corporation will convene a summit of the pensions value chain later in October to build on the progress already made and continue to take the Mansion House Compact from intention to implementation.