The British Business Bank is working to launch a new fund that could invest as much as £600m worth of pension savings into UK growth companies.
As first reported by the Times, the government-owned economic development bank has been working on a plan to push more funds into UK startups, in an attempt to curb the trend of foreign buyers snapping up promising British businesses.
As overseas venture capital firms, particularly from the US, are heavily investing in British companies, the initiative is aiming to foster competition and keep promising companies on domestic turf.
The bank is actively seeking proposals from pension funds to create fresh private sector investment vehicles in which the government would co-invest in.
Next month’s budget could unveil an initial two private sector collaborators for its “long-term investment for technology and science” initiative, known as the Lifts scheme.
The state fund comes in response to the Mansion House reforms spearheaded by Chancellor Jeremy Hunt.
Chief executive of the bank, Louis Taylor, said: “There is some time pressure there. It feels like fertile ground to be able to move things on. We are prosecuting this, the chancellor’s request, with some pace.”
With the growth fund, he reckons the bank could double its current investment of £300m a year in “each of equity and debt.”
“We think we could probably do double that [with the growth fund] without distorting the market too much. We don’t want to raise too much money that we can’t actually invest. But it’s got to be meaningful as well,” he said.
There is some doubt over pension cash being channelled into growth companies that are considered high-risk but Taylor said the industry has shown interest, especially larger funds.