The Treasury has opened a consultation proposing a national investment fund to help cutting-edge British start-ups. Currently, these innovative enterprises receive less funding than their counterparts and the Treasury is looking for new ways to increase the availability of patient finance.
The consultation “Financing growth in innovative firms” identifies new ways to ensure start-ups have access to the finance they need to establish themselves. The Treasury has found there is a £4bn funding gap between US and British firms. The national investment fund is intended to help address this gap.
At present, British businesses rely on funding from the European investment fund. The new fund would be UK-based and would help ensure that firms still have access to the funding they need, as the current funding will cease once the UK leaves the EU.
The paper from the Treasury looks at how these firms might benefit from investment originating from pension funds; and how to commercialise research from UK universities and drive investment in firms across the UK.
Philip Hammond, Chancellor of the Exchequer, said; “Britain is an innovation powerhouse and it is vital that we make sure our cutting-edge firms have the funding they need to meet their potential and conquer new markets. The new fund could be set up as a public-private partnership or be placed fully on the government’s balance sheet to be sold off once it has established a sufficient track record.”
The Treasury’s consultation forms part of the Patient Capital Review as announced by the Prime Minister in November last year. There is an immediate need to strengthen the UK as a place where innovative firms can obtain the long-term patient finance they need to scale up.
According to its findings, the UK is the European leader of ‘unicorns’, but continues to fall behind the US which accounts for 54% of these £1bn plus companies, whilst the UK makes up just 4%. Notably, the US firms are also considerably younger than the UK firms. Ten of the UK’s largest 100 listed firms were created after 1975 compared to 19 in the US but only 2 in Europe.
The consultation closes on 22 September, and the paper can be found here: https://www.gov.uk/government/consultations/financing-growth-in-innovative-firms