Chancellor Jeremy Hunt has announced a £320 million plan to drive innovation and unlock the first tranche of investment from his Mansion House Reforms ahead of his Autumn Statement.
A raft of measures – which are expected to provide an extra £1,000 for people’s pension pots every year – aim to help pension funds invest in high-growth, innovative companies to deliver for savers and grow the economy.
The government is supporting new investment vehicles tailored to the needs of pension schemes, allowing investment into the UK’s innovative companies.
£250 million will be committed to two successful bidders under the Long-term Investment for Technology and Science (LIFTS) initiative, subject to contract. This will 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 British Business Bank. The Growth Fund will draw on the BBB’s strong track record and a permanent capital base of over £7bn to give pension schemes access to opportunities in the UK’s most promising businesses.
This has been welcomed by eight pension schemes and fund managers as a potentially valuable addition to the market, the government says.
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Building on the recent BVCA Venture Capital Investment Compact, the package also includes measures to further strengthen the UK’s renowned venture capital industry. A new Venture Capital Fellowship scheme will support the next generation of world-leading investors in our VC funds, similar to the successful US Kauffman Fellowship.
“Innovation is the key to our future success as a nation and its vital that we do all we can to help companies start, scale and grow in the UK,” said Hunt.
“The Autumn Statement will be a huge step towards delivering our Mansion House Reforms and unleashing the full potential of our pensions industry.”
It comes as the Chancellor is convening representatives from several universities and investors at University College London (UCL) East where they will endorse a new set of ‘best-practice policies’ that are recommended by the independent review of spinouts.
The Chancellor is to inject £20 million to foster more spinout companies, firms created using research done in universities. He is also providing at least £50m additional funding for the British Business Bank’s successful ‘Future Fund: Breakthrough’ programme – that will provide direct investment to support these innovative companies to scale.
The independent review – led by Irene Tracey, Vice-Chancellor of Oxford University and Andrew Williamson, managing partner of Cambridge Innovation Capital – recommends innovation-friendly policies that universities and investors should adopt to make the UK the best place in the world to start a spinout company.
In the past, many spinout deals were created from scratch, which is both inefficient and sometimes fails to learn the lessons from previous success stories. The recommendations aim to speed up the process and build on TenU’s University Spin-out Investment Terms (USIT) Guide by recommending 10-25% university equity for life sciences spinouts, and 10% or less for less IP-intensive sectors, common in software.
The Chancellor has accepted all the recommendations and will set out his full response as part of today’s Autumn Statement.