The CEO of British Business Bank has said a new £50 billion growth vehicle supporting UK startups and scaleups will be live before the end of 2024.
Speaking at the Innovate Finance Global Summit at Guildhall in London, Louis Taylor revealed the work his organisation is doing to support the Mansion House Reforms, which aim to unlock at least £50bn of capital by 2030 through liberalisation of the rules governing pension investment.
“Our growth companies are not getting support from UK investors, with the consequence that when they get support from overseas investors, often from the US, they tend to migrate to where the capital came from,” he told the audience.
“Just at the point these companies are becoming really commercially interesting and economically impactful, they’re migrating to a different economy. The thesis goes on if it’s UK institutions that are invested in those companies, we stand a chance of retaining these companies here in the UK.
“We’re a fantastic innovation ecosystem. We’ve got great R&D coming out of our universities and from other companies as well. We can get them started, we can do product market match, but then when it comes to really commercialising and scaling up, that’s where we will need to provide some more money.
“This is going to be an iterative process … but for SMEs, what we hope it’ll mean is that there is a larger pool of domestic capital able to help companies to scale up. It gives them greater incentive to be here.
“It’ll be much more active within the next 12 months. We need to get regulated because of managing third-party money.”
The Mansion House reforms are intended to get more UK institutional money – most particularly defined contribution pension money – investing in the growth economy.
Several high-profile companies have recently raised concerns over faltering company valuations in the UK in comparison with the US, with e-therapeutics CEO Ali Mortazavi slamming the risk appetite of UK investors and indicating it will look to list in New York after de-listing from the London Stock Exchange’s junior AIM market.
“Ideally, we do want some valuation pick up relative to US markets,” said Taylor. “If you look at the valuation multiple differential on public markets even in private markets between the US and Europe generally, but including the UK, I would argue that that valuation multiple differential is a barometer of one, risk appetite and two, optimism bias.
“I think we have a cultural issue here as well as some regulatory issues that are preventing this money going into growth opportunities.”
From Series A to acquisition: Enjoy the journey… & plan for the final destination
He added: “I think it’s really important for pension fund trustees to see we’re not just creating something from the government and there’s an assumption that because it’s government, it should be fine. We should go through the same process that any other investment manager should have to go through.
“What we’re really selling is the track record with the bank in this space, and the opportunities that these fund investments provide in the subsequent co-investment opportunities, and the real opportunity to participate in the growth companies coming out of the UK.”
Meanwhile Innovate UK and the British Business Bank have signed a memorandum of understanding (MoU) to help create new pathways for business investment and promote growth across the nations and regions of the UK through innovation.
Indro Mukerjee, CEO, Innovate UK said: “As the UK’s innovation agency, Innovate UK works to support the growth journeys of innovative UK businesses, from startup to scaleup and beyond.
“The MoU and practical action plan with the British Business Bank are important steps to further build our support for economic growth, increased productivity, and skilled jobs.”
