The UK government is considering the implementation of a growth fund similar to the Canada Growth Fund, in order to stimulate the economy and promote investment in green technology and fast-growing businesses. According to sources familiar with the matter, the Treasury may announce plans for the fund in next month’s Autumn Statement. The fund could be managed by the state-owned British Business Bank, which currently provides loans and equity stakes to businesses throughout the UK. Both the Conservative Party and the Labour Party are reportedly considering expanding the role of the British Business Bank to boost investment in startups and revive listings on the UK stock market.
The potential growth fund has been a topic of debate within the Treasury for weeks, but no decision has been made yet. Some concerns have been raised regarding the cost of the fund. The Canada Growth Fund, which was launched in 2022 with C$15 billion, aims to accelerate investment in green transformation and attract more private funds for emerging technologies. However, it is expected that the UK’s financial commitment to a similar fund would be lower, with estimates ranging from US$600 million to US$2.5 billion.
The Treasury has been exploring various options, including loan guarantees and debt and equity structures, for the potential fund. Even a smaller fund could provide seed capital and attract co-investment from UK pension funds and other private investors. A more modest commitment may also be more politically favorable for Chancellor Jeremy Hunt, as it could avoid clashes with members of his party who may prefer the funds to be used for tax cuts ahead of next year’s general election.
The introduction of a growth fund would build on recent government initiatives to collaborate with the private sector, such as the opening of the UK’s largest electric vehicle charging hub in Birmingham and the allocation of over £50 million to manufacturing projects including self-driving cars.
The growth fund is one of several ideas being considered by the Treasury to attract more investment in new technology companies and encourage UK pension funds to direct more savings into higher growth investments. This comes after a group of pension providers signed up to Chancellor Hunt’s “Mansion House Compact” earlier this summer. The agreement commits the group to allocate 5% of their assets to growth investments by 2030, injecting £50 billion into the economy. However, critics argue that the impact of the agreement may be limited, as it does not require the assets to be invested in UK startups. A growth fund focused on the UK could address this concern.
More detail via The Star here… ( Image via The Star )