A new chapter of scale, speed and ambition for the British Business Bank

Strategic asset allocation remains overwhelmingly global, selective and mobile. As the largest LP investor in venture in the UK, we need to adapt how our capital is deployed so that it meets the capital allocation needs of institutional investors. Otherwise we risk as a country remaining strong at company creation but weak at retention and scale. To meet this challenge, the next five years will see a significant step change in the scale, speed and style of the British Business Bank’s investment activity.

It is a new chapter for the Bank. We have been given a clear, updated mandate by government, to which we have responded with the publication of our first-ever Five-year Strategic Plan. We have an increased financial capacity of £25.6bn, and within the Investment Business we have c.£2bn of new capital to deploy per year in the venture ecosystem alongside a set of reforms that give us greater flexibility and a permanent capital base, allowing us to re-invest returns. But we cannot do things in exactly the same way as we have done in the past.

At the scale up phase, we need to build strategic partnerships and write larger cheques into new larger funds, aligning with a consolidating pension fund system and mobilising institutional capital into venture. The ambition is necessary. While the Bank’s commercial equity investments have helped narrow it, the funding gap for scale-ups remains a significant problem.

The British Business Bank recently made a £60m commitment to NorthEdge IV under its new Growth Equity Strategy. Under this mandate, the Bank will be able to invest in private equity funds focused on backing smaller businesses, particularly those aligned with the eight growth-driving sectors set out in the Government’s Modern Industrial Strategy.

The Bank cannot succeed on its own, and so the changes we are making are intended to be more inclusive and to crowd in significantly more private investment from the UK’s pension fund base. There is a convergence of circumstances – at the company level and at the LP level – for larger funds, and we want GPs to show the requisite ambition to rise to the challenge to exploit the opportunity.

This important work will complement the just-as-important work at the earlier stages, where we need to make sure that we support more female investors and companies, more managers from underrepresented backgrounds, from more parts of the country, and in doing so accommodate a variety of potential platforms that are not a one-size-fits-all LP-GP structure.  

The UK has deep pools of capital, yet investment in UK companies by domestic institutional investors still lags many international peers. Having formerly been a CIO at a large pension fund, I am firmly of the view that allocators need a choice architecture to help them navigate their ambitions and allocate more capital to venture.

At the Bank, we are launching Venture Link to give allocators direct visibility of open single fund opportunities that we have committed to as an LP. Some pension funds may want curated or diversified solutions, and through our third party service we can also be the GP as with the British Growth Partnership Fund I, where we are co-investing alongside our deep and wide GP networks.

In addition, the Bank can now invest larger amounts in companies through direct investments from our balance sheet and are doing so. We have recently invested £25 million in Wayve, the UK autonomous driving company, as part of a $1.2 billion Series D investment round, and £25 million in Kraken, as part of its $1 billion de-merger from Octopus Energy Group.

Companies like these deserve deeper domestic backing, but too often UK institutional capital is absent from later stage funding rounds. The Bank is stepping up and investing in these companies, both to encourage UK institutions to invest alongside us and to give the UK taxpayer exposure to the country’s highest-potential tech champions.

For members thinking about practical engagement, the message is to come to us early. We invest across a wide range of fund strategies and are actively looking for fellow LP partners. The pace of our activity has increased, and the pipeline is strong. The UK venture ecosystem has gained significant momentum, and the Bank’s role will amplify it in 2026 and beyond.
 

Authored by Leandros Kalisperas,
Chief Investment Officer, British Business Bank