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Peer2Peer Finance News | October 23, 2018

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Chancellor to back support package for scale-ups

Chancellor to back support package for scale-ups
Emily Perryman

THE Chancellor is expected to give his backing this week to a series of recommendations aimed at supporting UK scale-ups, including the creation of a multi-billion pound fund.

The recommendations have been submitted to the Treasury by private sector bosses‎ as part of the Patient Capital Review commissioned by Philip Hammond (pictured) earlier this year.

The industry taskforce calls for a three-pronged approach to overcoming the barriers faced by companies as they move from start-up to scale-up mode.

It suggests that an independent Patient Capital Investment Vehicle be created, which would accept money from retail and institutional sources and aim to invest £1bn each year.

Hammond signalled his backing for a similar initiative in August when he launched a consultation on the creation of a national investment fund to replace EU funding to British start-ups after Brexit.

The taskforce also asks the Chancellor to back the creation of a Patient Capital Investment Company programme, which would enable new funds licensed by the British Business Bank to raise money from commercial lenders alongside the use of new equity‎.

The third recommendation is to extend the investment limits for tax-efficient schemes such as the Enterprise Investment Scheme and venture capital trusts, in order to raise up to an additional £1bn.

Read more: Chancellor sets outs commitment to UK fintech after Brexit

The recommendations, seen by Sky News, are expected to be welcomed by Hammond either alongside his Budget on Wednesday or shortly afterwards.

Research suggests a far higher proportion of comparable companies in the US turn into large international enterprises than their British peers.

The taskforce said this indicates that many‎ UK-based businesses are unable to reach their full potential. They either remain stuck in a mode of incremental growth or accept a trade sale as the most convenient exit.

The panel, chaired by Sir Damon Buffini, a former ‎partner at the private equity firm Permira, said the combined measures would address a potential deficit in funding for fast-growing companies following the Brexit-triggered withdrawal of the European Investment Fund.

Read more: Hammond underlines importance of fintech for UK economy

Sources close to the review told Sky News that if the Treasury implemented ‎the recommendations it could pave the way for a string of new British “unicorns” – companies which move from start-up to be worth more than $1bn.

The industry panel also included Nigel Wilson, Legal & General chief executive; star fund manager Neil‎ Woodford; and Dr Mike Lynch, the former boss of software group Autonomy and a backer of companies such as Darktrace, the cybersecurity start-up.

Rhydian Lewis, RateSetter’s chief executive and founder, welcomed the recommendations.

“I welcome reports that the chancellor will implement recommendations on business growth from the likes of Neil Woodford – who is among RateSetter’s backers,” he said.

“The UK is a great place to set up a business, but scaling up is seriously tough.  It is long overdue that we address this and eliminate barriers to business growth which hold back productivity, jobs and delivery of more value to more people across the UK.”

Read more: Most UK tech founders expect to sell for £50m or less