Financing Growth in Innovative firms – one year on

6th November, 2018

Overshadowed somewhat, the announcement “The Royal Mint will create a new commemorative Brexit coin [50p] to mark the UK’s exit from the European Union”[1] I did manage to find a Autumn Budget 2018 document on the “Unlocking long-term pensions investment” that I blogged on pre-Budget.

DC Pensions investment

In the snappily entitled ‘Financing Growth in innovative firms: one year on’ document, there is a chapter on ‘Unlocking long-term pensions investment’.  From my reading of this chapter, the key points are:

  • Direct Contribution (DC) pension funds perceived to have the potential to become key institutional investors in UK patient capital (with a forecast £1 trillion of assets by 2025)
  • DC pension providers have expressed substantial appetite for more active investment in the UK economy, including through patient capital-type investments
  • “To facilitate this investment, HM Treasury has announced a series of measures to remove barriers and support pension funds in accessing this asset class.” These ‘measures’ fall under three main headings, in each of which HM Treasury appears to be working with other interested parties/ stakeholders to develop a framework for DC pensions investing patient capital-type investments:
  • Addressing regulatory barriers to patient capital investment
  • Facilitating pooled investment in patient capital
  • Wider reforms in the pensions investment market

Wider context – Patient Capital and British Business Bank

The commitment made by the UK government to “work with the pensions industry and its regulators to unlock further investment into our innovative high growth firms” is part of its Patient Capital initiative “to strengthen the UK as a place where high-growth, knowledge-intensive firms can obtain the long-term ‘patient’ finance that they need to scale up”.

Other measures that have formed part of its “ten year action plan to unlock over £20 billion to finance growth in high-growth innovative firms”, as cited in the report include:

  • “Launching British Patient Capital, which has been given resources of £2.5 billion to invest in innovative firms, in June 2018
  • Extending the Enterprise Investment Schemes (EIS) and Venture Capital Trusts (VCTs) to support innovative knowledge-intensive companies
  • Launching the Managed Funds programme, a fund of funds seeded with £500 million by the British Business Bank, in May 2018
  • Investing in first-time and emerging fund managers through the British Business Bank’s Enterprise Capital Funds
  • Backing overseas investment in UK venture capital through the Department of International Trade, securing £240 million of investment this financial year
  • Launching the National Security Strategic Investment Fund in September 2018 with up to £85 million to invest in advanced technologies that contribute to our national security mission
  • Launching the Regional Angels programme run by the British Business Bank in October 2018 to support developing clusters of business angels outside London
  • Carrying out research led by the British Business Bank on female access to venture capital funding, the talent we need to grow the UK venture capital industry and access to growth finance for intellectual property-rich firms
  • Consulting on the technical details of a change to Entrepreneurs’ Relief (ER) so company founders are not discouraged from seeking external investment due to the dilution of their shareholding.”

[1] The Brexit coin was number 15 on the HM Treasury’s ‘Budget 2018: 24 things you need to know’.  ‘Financing Growth in innovative firms…’ did not make the 24.

I will be writing further on some of the above over the coming months.

I am also hoping that the British Business Bank will be involved in ‘Finance in Cornwall 2019’ – the British Business Bank are a key player in the delivery of these measures.

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