Louis Taylor said he wanted the state-owned development investor to become a ‘sovereign growth fund’ to back British start-ups, in an interview with the Financial Times.
The aim would be to reinvest proceeds from its venture capital investments, Taylor said.
British Business Bank’s venture capital arm, British Patient Capital, has a remit until 2028, which Taylor wants the government to extend.
It was launched in 2018 with a ten-year mandate and an initial £2.5bn of government funding, after the Treasury identified that a lack of access to long-term finance was holding back some companies.
BPC is now the UK’s largest domestic investor in venture capital.
Taylor told the FT that the BBB was “now of a size where it could usefully be self-sufficient outside of the government budgeting process . . . Not that we should be given a lot more capital, but the capital we have should be recycled and it should accrete”.
He added: “It has to be seen as the sovereign growth fund with long-dated infrastructure. If we can’t reinvest the proceeds of what we have, the real value is down.”
The bank, which is used by the government to pay for certain policy choices, backs venture capital funds that then invest in companies such as technology and life sciences.
It also oversees how regional investment and start-up funds are financed. During the pandemic, it administered Coronavirus Business Interruption Loan Scheme loans.
Plans for a British sovereign investor have been discussed within the financial services sector for some time, including by Nicholas Lyons, the veteran investment banker and insurance executive.
When Lyon became lord mayor of London last year, he said he was working to bring together institutional pension money for an investment fund of up to £100bn.
If successful, this would rival major sovereign wealth funds such as those of Saudi Arabia or Norway.
Taylor argued in the interview that the BBB’s “100% growth agenda” fitted with the government’s “plan for growth”.
If ministers wanted more investment in areas outside existing programmes, “then we need a bigger envelope”, he added, pointing to the need to back industries focused on areas such as net zero.
There was “scope to do quite a lot of this [investing] in a relatively fiscally neutral way through loan guarantees”, he said.
Areas outside existing programmes could include providing finance for larger, fast-growing start-ups that could otherwise risk being acquired or needing financing from outside the UK, Taylor added.
In the 2021-22 financial year, the BBB made an adjusted return of 18.2%, exceeding its target of 0.06%. Profit before tax was £604.8m, up from £293.5m in 2020-21, mainly due to an increase in net gains on investments.
However, Taylor warned that “some of the gains over the last couple of years will unwind” following the market rotations away from growth, as the portfolio is heavily weighted towards the tech sector.
