The UK’s drive to stimulate economic growth and enhance investment opportunities for pension schemes and asset managers takes a significant step forward with the announcement of a new initiative by the British Business Bank (BBB).
The UK finance ministry unveiled plans for a fund aimed at encouraging these financial entities to divert a portion of their funds from traditional investments like bonds and global blue-chip stocks towards UK growth companies.
The primary objective behind this move is to bolster returns for investors and generate a more robust pipeline of potential company listings.
This initiative becomes even more critical as the London Stock Exchange faces increasing competition from financial centers in New York and the European Union following Brexit.
UK Finance Minister Jeremy Hunt is set to present his budget, incorporating the ‘Mansion House Compact’ announced in July.
Under this compact, ten companies have voluntarily pledged to allocate 5% of their pension funds to small listed companies and unlisted growth companies by 2030.
These measures will mark the first phase of utilizing the £75 billion made available through the Mansion House reforms.
The BBB is playing a pivotal role in this initiative by investing £250 million to establish two investment vehicles under the Long-term Investment for Technology and Science (LIFTS) initiative.
These vehicles will be open to pension schemes and have the potential to attract over £1 billion in private capital.
Additionally, the BBB, a state-backed development bank, is launching a new growth fund with a substantial permanent capital base exceeding £7 billion.
The bank is collaborating closely with industry stakeholders to design the investment vehicle, with further details to be announced in due course.
Furthermore, the BBB’s “Future Fund: Breakthrough” program, which provides direct investment to support promising innovative UK firms, will receive a boost of at least £50 million in additional funding.
These initiatives collectively represent a significant stride towards realizing the Mansion House Reforms and unleashing the full potential of the UK’s pensions industry, as highlighted by Finance Minister Jeremy Hunt.
As the UK strives to harness the power of its domestic investment resources, these reforms aim to diversify investment portfolios, drive economic growth, and strengthen the competitiveness of its financial markets.