Start-up splash: British Business Bank’s ‘mandate’ could change to beef up growth investment

A new government could change the mandate of the state-backed British Business Bank to enable it to ramp up investment into bigger start-up rounds, its chief executive has suggested.

Speaking with City A.M.’s Bonds & Ballots series, Louis Taylor, the chief executive of the state-owned development bank, said there “is some scope” for a new government to change the purpose of the bank and use it as a vehicle to fill an equity funding gap in the UK.

The British Business Bank shot into the national consciousness through the pandemic as the main vessel for the government’s emergency loan schemes, which helped keep thousands of businesses afloat through the pandemic. 

Under the so-called Mansion House reforms rolled out by Chancellor Jeremy Hunt last July, the bank was also called in to help set up a new “growth fund” to funnel pension cash into start-ups.

Taylor said there was a possibility that the bank could now be beefed up to allow it to play a bigger role in start-up funding, however.

“I think that there is some scope for a new government, whatever colour, to change the mandate of the bank a bit,” Taylor told City A.M. 

“We have money to go into equity investment up to Series B, a few larger rounds, but not in great scale. I think the opportunity is there if government wants to help us to invest at later stage,” he added.

A newly muscled-up funding mandate would come on top of the growth fund the chancellor asked the bank to set up last summer, he said.

Under the plans, the British Business Bank led-vehicle will allow big institutional investors like pension funds to invest a “small amount” in alternative assets like venture capital.

The plans are currently being worked on by the BBB and Taylor told City A.M. this week he hoped to have won regulatory approval for the fund by the end of this year.

Launched under then-business secretary Vince Cable during the coalition government in 2012, the bank was set up with an initial £1bn funding to offer small firms capital. The lender’s core programmes support over £12.4bn of finance to more than 90,000 smaller businesses and it has since set up various subsidiaries including British Patients

The comments came as the British Business Bank revealed its temperature check on small businesses around the country. 

More firms were forced to lean on throughout the year, growing from 41 per cent in the first quarter to 50 per cent in the third quarter. The rate of increase indicated “a growing need for finance to support cash flows, with a greater reliance on credit cards”, the bank said.