UK scaleup and spin-out victories ahead of Autumn Statement

UK Chancellor Jeremy Hunt has announced a £320 million plan aimed at getting the UK’s pension pots working for both investors and tech startups looking to scale in their home territory.

The government is supporting new investment vehicles tailored to meet the needs of pension schemes and moving some regulatory barriers to enable investment into the UK’s innovative companies.

According to a press release, published today on gov.uk ahead of tomorrow’s Autumn Statement, £250 million will be committed to two successful bidders under the Long-term Investment for Technology and Science initiative.

This, it said, aims to provide over a billion pounds of investment from pension funds and other sources into UK science and technology companies.

To complement private investment vehicles, a new growth fund will be established within the state-owned British Business Bank, which has a mission to increase the supply of credit available to SMEs.

The government says that the fund will draw on the BBB’s permanent capital base of over £7 billion to give pension schemes access to opportunities in the UK’s most promising businesses.

According to the statement, the news has been welcomed by eight pension schemes and fund managers as a potentially valuable addition to the market.

The pressure on government to do more to unlock its nation’s estimated £4 trillion pound pension pot has been mounting for some time.

Layers of pensions and financial services regulation has made it harder to invest in technology startups, which are seen as too risky.

Bodies such as Tech UK and the ScaleUp Institute point out that this has led to a slew of UK start ups moving abroad to seek further investment or to list on the US stock exchange.

The UK’s push to fuel growth and overhaul regulation has been dubbed the Mansion House reforms. Around nine funds signed up to a voluntary agreement in July to invest some of its investors’ money in unlisted assets or early-stage companies by 2030.

“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,” said Hunt.

“Tomorrow’s Autumn Statement will be a huge step towards delivering our Mansion House Reforms and unleashing the full potential of our pensions industry” he added.

However, a report in the FT.com at the weekend warned of several roadblocks to the chancellor’s measures, which hinge on the fact that illiquid assets are more expensive to invest in than public assets because there’s a higher risk attached.

As part of the same fund, a further £20m will be used to foster more companies that have spun out of tech projects at universities – spin-outs. At least £50m in additional funding is to go towards the BBB’s Future Fund Breakthrough programme, which provides direct investment to spin-outs to scale up.