East Midlands to benefit from £2.6bn investment in small business growth as British Business commits £6.6bn to UK’s modern Industrial Strategy

As part of today’s announcement the British Business Bank will commit £2.6bn of capital to help drive the growth of smaller businesses across the UK’s Nations and regions, including the East Midlands.

The £2.6bn commitment comes as part of the Spending Review settlement, which saw the Bank’s total financial capacity raised to £25.6bn. The capital will support entrepreneurs wherever and whoever they are to access capital, driving the growth of smaller businesses across the UK’s Nations and regions, including high-growth innovation clusters across the country.

Measures announced today that will support businesses in the East Midlands, include:

• An additional targeted £100m investment into the Bank’s existing Nations and Regions Investment Funds, including the Midlands Engine Investment Fund II, and the embedding of dedicated Cluster Champions: the new funding, which will be targeted at bolstering regional innovation, will be accompanied by dedicated Cluster Champions. The champions will be individuals with deep expertise and local knowledge who will help strengthen financial networks and connect high-potential firms in the eight Industrial Strategy sectors to investors within ten clusters working with Innovate UK.
• Expansion of the British Business Bank’s Regional Angels Programme: helping reduce regional imbalances in access to early stage equity and support for smaller UK businesses.
• Expansion of diverse angel networks through new Angel Syndicate Support and Embracing Diversity programmes: these will deliver operational support to angel syndicates focused on bringing in more underrepresented angel investors to back early-stage companies, while helping to ensure that founders from all backgrounds have access to the capital they need to grow.
• Creation of a more inclusive investment ecosystem with a new Investor Pathway Capital programme: this initiative will support diverse and emerging fund managers across the economy and make it easier for new entrants, particularly those from underrepresented groups, to break into the venture capital space. Other small business finance initiatives will be announced next month as part of the government’s Small Business Strategy.

These measures build on the existing £400 million Midlands Engine Investment Fund II which provides debt finance from £25k to £2m and equity investment up to £5m small and medium sized businesses in the region.

Targeted sector support

A new £4bn initiative, British Business Bank Industrial Strategy Growth Capital, will be invested through the Bank’s existing capabilities across the eight growth-driving sectors- advanced manufacturing, clean energy industries, creative industries, defence, digital and technologies, financial services, life sciences, and professional and business services - crowding in another c.£12bn of private capital. British Business Bank Industrial Strategy Growth Capital will therefore deliver around £16.0bn of capital to invest in smaller businesses and innovation across the eight Industrial Strategy sectors over the next four years.

This follows the recent announcement at the Spending Review of the increase in the British Business Bank's total financial capacity to £25.6bn, which will enable a two-thirds increase in investments to around £2.5bn each year. This investment is expected to crowd in tens of billions of pounds of additional private capital and will support the most innovative UK businesses to access the capital they need to start, scale and stay in the UK.

Also confirmed were reforms to the British Business Bank’s governance and financial arrangements which will be implemented by the end of this financial year. These will place the Bank in a position to successfully deliver the increased level of investment activity and will mean the Bank has a newly permanent and more fungible capital base, with greater flexibility to re-invest returns over the long term and increase growth and prosperity across the UK. This £16.0bn of permanent capital, which will be invested through economic cycles, will help underpin investment and confidence in the UK’s growth and innovation economy.

Louis Taylor, CEO, British Business Bank, said: “We welcome today’s announcement by the Secretary of State to deliver British Business Bank Industrial Strategy Growth Capital, as well as the reforms to the Bank’s governance and financial framework. Using our market expertise and reach, we have a critical role to play in supporting smaller businesses in the eight growth-driving sectors to grow and stay in the UK.

“To deliver the government’s growth mission it is critical that our most promising entrepreneurs can access the finance they need to grow their businesses, no matter what their background or where they are located across the Nations and regions of the UK.

“This is a strong endorsement of the Bank’s 10-year track record, market access and capabilities, including our position as the largest investor in UK venture and venture growth capital funds and the most active late-stage investor in UK life sciences and deeptech.”

Backing innovation as part of the UK’s modern Industrial Strategy

The new £4bn modern Industrial Strategy capital initiative will include more flexible and customised approaches to the market to tailor support to the needs of each sector.

The British Business Bank Industrial Strategy Growth Capital will:

• Tackle the scale-up financing gap for priority sectors by investing greater amounts in companies through our direct investments, leading future investment rounds and making strategic large investments of up to £60m in UK companies that are at the forefront of driving innovation and growth.
• Build a long-term funding ecosystem by cornerstoning specialist venture capital funds investing in modern Industrial Strategy sectors and doubling our support for emerging fund managers.
• Work with industry to actively develop new products and solutions to support priority sectors and subsectors, for example by making early-stage direct investments into UK AI companies in areas of high potential with a view to keeping them in the UK longer term, or creating new specialist debt funds to leverage private investment into supply chains of priority sectors.

These measures are expected to deliver around £30bn of additional Gross Value Add (GVA) to the UK economy through incremental company growth over the life of the investments.