Mansion House Compact Unveiling British Business Bank's Impact on Economy

11 Mar, 2024

Mansion House Compact Unveiling British Business Bank's Impact on Economy

In July 2023, the UK's chancellor introduced the Mansion House Compact, assigning the British Business Bank the pivotal task of establishing an investment vehicle. This vehicle, designed to attract pension fund investments, aims to leverage the bank's commercial capabilities and investment pipeline for the benefit of the UK's high-growth companies. British Business Bank CEO Louis Taylor discussed the multifaceted objectives, emphasizing the focus on helping small businesses access finance and securing UK institutional money into venture capital and growth equity.

Taylor underscored the retreat of institutional money from UK equity over the past two decades and the bank's role in catalyzing market impact. The chancellor envisions a vehicle allowing UK institutional asset owners, especially defined contribution pension schemes, to invest in challenging market segments.

Taylor highlighted the potential for increased institutional investments without adversely affecting valuations. The British Business Bank anticipates a catalytic impact, eventually enabling pension funds to succeed independently in this market. Taylor envisions the government stepping back as pension funds demonstrate the market's attractiveness, allowing the bank to phase out or sell the fund.

Since the bank's mandate, Taylor reported engagements with over 20 pension funds, expressing interest but struggling to find economically viable avenues. The challenge lies in conducting due diligence and efficiently investing in venture capital opportunities. The bank's existing investments in over 70 venture capital and growth equity funds, covering 1,200 companies, form a robust foundation for the envisioned vehicle.

The British Business Bank's Future Fund: Breakthrough initiative, focused on tech and science-led companies, further contributes to the vehicle's development. Taylor outlined the ongoing process, including creating segregated entities, establishing necessary functions like investor relations, and seeking regulatory approval. Despite the complexities, Taylor expects the vehicle to be operational within 18 months, poised to shape the landscape of institutional investment in the UK.