The British Business Bank made a £122mn post-tax loss in its latest financial year, as falling start-up and tech valuations continued to drag on the state-owned organisation’s financial performance.
The bank, which backs smaller UK companies with the aim of boosting economic activity, reported on Thursday a £162mn hit to the value of its investments in the 12 months to March, a slight increase on the previous year.
The value of its investments surged during the Covid-19 pandemic as tech valuations soared but these have gone into reverse more recently, pushing the bank to two consecutive years of losses.
BBB chief executive Louis Taylor had signalled in September that falling valuations might continue to affect the bank’s financial performance.
Ahead of the publication of the bank’s latest results on Thursday, he said: “We’re starting to see a flattening-out of that valuation curve but we’re not necessarily calling the bottom of it at the moment.”
Taylor said the bank had “performed above expectations against a backdrop of challenging market conditions”.
The losses were mostly “unrealised” markdowns to the carrying value of investments that the bank continues to hold, Taylor said.
“Significantly, valuations remain 1.35 times our original cost, and we would expect them to rise further over their five-to-10-year investment period as we enter a period of recovery and economic growth,” he added.
The bank is one of several institutions under the microscope as the new Labour government seeks to encourage private sector investment in the UK by changing regulations and using limited amounts of public money.
The BBB said that in 2023 it had invested £3.5bn of public money in 23,100 businesses, attracting £2.5bn of co-investment from the private sector. The investments would support nearly 40,000 extra jobs, it said.
The government announced last month the creation of a “national wealth fund” to invest £7.3bn in infrastructure over five years with the aim of unlocking £20bn of private investment alongside it.
Under the plans, the bank would be expected to work with the new fund and existing bodies, such as the UK Infrastructure Bank, but Taylor said there was “no reason” to think it would cease to be independently managed.
The government and the Financial Conduct Authority regulator have also been pushing to change regulations to attract more companies to list in London and encourage domestic pension funds to invest in UK private companies.
The creation by asset managers Legal & General, Schroders and Phoenix of funds focused on investing in private assets demonstrated “a shift of attitude and a recognition of underexposure to a lot of really attractive UK assets”, said Taylor.
The bank is expected to seek regulatory approval to run a new growth fund that would make investments on behalf of private investors.
Taylor said it was a “myth” that pension funds were not interested in UK assets or that they only wanted to invest in lower-risk index funds.
The results came as the FCA launched a consultation on a proposed framework for assessing pension funds’ performance. The proposals involve comparing how they do not only on costs but also on investment performance and service quality.
Some in the industry argue that providers have focused on minimising costs instead of securing the best returns for pension savers, which may involve investing in more complex asset classes such as private companies.
