The support of the British Business Bank is vital for many of the start-up and growing businesses across the UK’s science park estate.
Set up by the government 10 years-ago to provide access to financial support for smaller businesses, the British Business Bank has supported greater investment into many of the innovative companies based on UK science parks.
In her keynote address to the UKSPA conference at Warwick University, the bank’s Chief Customer Officer Angelene Woodland outlined its work to drive sustainable growth, innovation and prosperity.
“We’re really here to confront what I always see as a really crucial challenge, which is how do we transform world class research into tangible commercial success ,” she said.
“We pay testament to the brilliant minds, the great ideas that we have across the UK, but we still find ourselves grappling with that persistent gap between our research capabilities and the commercial outcomes that we know should be flowing from them.”
The British Business Bank aims to plug gaps in the funding market through a number of specially-designed financial instruments, supporting smaller businesses.
“Backing innovation isn’t just a theme for us. It’s actually one of our core strategic objectives that we’ve agreed with our shareholder – the Department for Business and Trade.
“We have to be here to ensure that innovative businesses can access the capital that they need to start and to scale. We form an important part of that investment funding landscape through the programmes that we deliver. Those could be equity programmes or supporting UK debt markets.
“We also focus on research and insights. We believe that we are here to play a convening role across the ecosystem. We are also here to support small businesses through the provision of information and guidance.
“The businesses I speak to at some of the parks I’ve been to recently have all shared some of those challenges that they’ve had along their funding journeys. So for us, being able to provide that information and guidance is critical.”
British Business Bank research findings showed that alternative finance channels such as peer-to-peer lending and equity crowdfunding have continued to grow by 12% year on year.
There had also been a significant surge in equity investment, with venture capital deals exceeding £5 billion for the first time.
But there were also consistent regional disparities across the UK. “Smaller businesses in rural areas and coastal towns face greater challenges in accessing funding than their counterparts in London or Birmingham or Manchester.
“We really want to double down on our efforts to try to address some of these disparities and ensure that businesses, irrespective of place, are able to to access the funding that they need.”
Despite the strength of the UK’s university sector, “Why is it that we still see that our innovative research doesn’t always translate to the level of high skilled jobs that we’re looking for or to the economic growth that we desperately need.
“The problem is UK-wide. Despite the significant investment in research and development startups, we know that outside the Golden Triangle, organisations and businesses are accessing less funding than they do within that that sweet spot. And that disparity not only stifles that local entrepreneurial spirit, it also can leave some really important intellectual property underutilised.
“There are barriers to finance for innovative businesses at the scale-up stage as well. They find it harder to access their growth finance due to significant gaps in terms of the types of finance that they need at that stage of their business growth.
“We’re really trying to turn the tide of underinvestment in innovation, as well as supporting more universities and championing those groundbreaking innovations across the UK.”
The British Business Bank’s financial instruments include its regional angels programme, which has so far deployed over £85 million of early-stage equity into 500 businesses across the UK.
It also has its Enterprise Capital Fund which has worked with third parties to commit over £2 billion of capital to support more than 800 innovative companies. BBB also set up British Patient Capital, which is deploying over £2.5 billion in co-investment in promising later-stage UK companies and is largest domestic investor in UK venture and venture growth funds. There is also a successful programme of Nations and Regions Investment Funds.
British Business Bank is also playing a key role in unlocking institutional investment, including from UK pension schemes, in order to increase that supply of domestic sources of capital for productive investment and increase access to potentially higher returning assets for UK savers.
And at October’s International Investment Summit the Chancellor announced that the British Business Bank will establish the British Growth Partnership, encouraging more UK pension fund investment into the UK’s fastest growing, most innovative companies.
“We really believe that the mandate is clear,” said Angelene Woodland. “We have to be unlocking hundreds of millions of pounds of domestic investment into those UK high growth businesses and we know that by doing that we can really capture the true commercial potential of all of these world class breakthrough companies that we have.
“Our aim is to start making investments by the second-half of 2025, so watch this space.”
The British Business Bank was also recently awarded £250 million out of the long term investment for technology and science programme. So with that initiative £50 million has been awarded to Schroders Capital and £100 million to ICG and they will then create two new investment vehicles that are accessible to pension funds and other institutional investments. In addition that will be supported by another £250 million of pension investment from the Phoenix Group.
“Together those are expected to generate over £1 billion of investment into UK science and tech companies.
“We really believe that these initiatives will address some of those specific funding gaps that we know exist, particularly for unlisted smaller businesses who are seeking rounds of capital to scale up and accelerate their growth.
“Our universities and the country’s centres of innovation are among some of the best in the world. We know that they produce significant amount of groundbreaking research and it’s really through the creation of university spin-out companies that we achieve that.
“The UK no longer wants to be incubator country. We want to incubate them and then we want to capitalise them so they stay and grow and we realise the benefits of the support that we give.
“To do that, the groundbreaking businesses behind these solutions need to be able to access that long term patient capital. That means that they can scale and stay here in the UK.
“Research and development is absolutely critical but we. know that there is there is a gap with knowledge-intensive companies that have got high-growth potential: they find difficult to obtain that critical capital to scale and grow.
“But during the years 2021 to 2023, the British Business Bank supported 160 equity deals specifically to companies classified as academic spin-outs. There are still more to do, but those 160 deals represented 13% of all of the deals made across the bank.
“So we really are trying to see how we can support that university spin-out sector and moving forward as we’re thinking about spending review bids, that is very much part of our thinking in terms of the proposals that we’re drawing up.
“It’s also all about working in partnership, so we already work with partners such as UKRI and also we work very closely with Innovate UK.
In fact, 97% of the spin outs that went on to receive funding from the bank and from Innovate UK remain active compared to 49% of those who did not.
“Collaboration really sits at the the heart of this challenge. We’ve really got to take the opportunity to build a more equitable ecosystem that channels that risk capital and business expertise into our most promising high growth sectors.
And we can only do that by embracing collaboration. This event already is a great demonstration of that, which brings together national and industrial leaders, entrepreneurs, academic institutions and government representatives.
“Together we’ve got the opportunity to create that supportive ecosystem that nurtures innovation at every level .
“We know that the challenge in front of us is not insurmountable. We know that we’re building on really strong foundations, and with that determination, with the collaboration which these types of events bring, we know that we can ensure that the UK really transforms itself into an innovation capital where we can really harvest and learn from those tangible benefits that will benefit all of us, right across the UK, irrespective of place or gender.”
Author: Simon Penfold
Photography Credit: Ed Nix