£320 million plan to usher innovation and deliver Mansion House Reforms
The Chancellor has announced a £320 million plan to drive innovation and unlock the first tranche of investment from his Mansion House Reforms.
- New investment vehicles tailored to the needs of pension schemes to support investment into the UK’s most promising high-growth companies.
- Latest step in delivering the Chancellor’s Mansion House Reforms unlocking £75 billion
- Expected to provide an extra £1,000 a year for the average earner that starts saving from 18
The Chancellor has announced a £320 million plan to drive innovation and unlock the first tranche of investment from his Mansion House Reforms.
A raft of measures – which are expected to provide an extra £1,000 for people’s pension pots every year – will help pension funds invest in high growth, innovative companies to deliver for savers and grow the economy.
The government is supporting new investment vehicles tailored to the needs of pension schemes, allowing investment into the UK’s innovative companies.
£250 million will be committed to two successful bidders under the Long-term Investment for Technology and Science (LIFTS) initiative, subject to contract. This will provide over a billion pounds of investment from pension funds and other sources into UK science and technology companies.
To complement private investment vehicles, a new Growth Fund will be established within the British Business Bank. The Growth Fund will draw on the BBB’s strong track record and a permanent capital base of over £7 billion to give pension schemes access to opportunities in the UK’s most promising businesses. This has been welcomed by 8 pension schemes and fund managers as a potentially valuable addition to the market.
Building on the recent BVCA Venture Capital Investment Compact, the package also includes measures to further strengthen the UK’s renowned venture capital industry. A new Venture Capital Fellowship scheme will support the next generation of world-leading investors in our VC funds, similar to the successful US Kauffman Fellowship.
The Chancellor, Jeremy Hunt, said:
“Innovation is the key to our future success as a nation and its vital that we do all we can to help companies start, scale and grow in the UK.
“Tomorrow’s Autumn Statement will be a huge step towards delivering our Mansion House Reforms and unleashing the full potential of our pensions industry.
It comes as the Chancellor is convening representatives from several universities and investors at University College London (UCL) East where they will endorse a new set of ‘best-practice policies’ that are recommended by the independent review of spinouts.
The Chancellor is to inject £20 million to foster more ‘spin-out’ companies, firms created using research done in universities. He is also providing at least £50m additional funding for the British Business Bank’s successful ‘Future Fund: Breakthrough’ programme – that will provide direct investment to support these innovative companies to scale up.
Spin-out companies raised £5.3 billion in investment in 2021-22 alone. Today’s announcements are designed to increase investment for the future and help ensure researchers in our world-leading universities have the tools they need to start, scale, and grow innovative new businesses in the UK.
The independent review – led by Irene Tracey, Vice-Chancellor of Oxford University and Andrew Williamson, Managing Partner of Cambridge Innovation Capital – recommends innovation-friendly policies that universities and investors should adopt to make the UK the best place in the world to start a spin-out company.
In the past, many spin-outs deals were created from scratch, which is both inefficient and sometimes fails to learn the lessons from previous success stories. Today’s recommendations aim to speed up the process and build on TenU’s University Spin-out Investment Terms (USIT) Guide by recommending 10-25% university equity for life sciences spinouts, and 10% or less for less IP-intensive sectors, common in software.
The Chancellor has accepted all the recommendations and will set out his full response as part of the Autumn Statement tomorrow.
This move will help deliver the Prime Minister’s pledge to grow the economy by supporting our world-leading university research institutions, which generate around £10 billion a year for the economy.
Further information
Supportive statements for the Independent Review of Spin-outs
- Chancellor, Jeremy Hunt, said:
“Innovative, globally competitive businesses like Oxford Nanopore are making a huge contribution to our economy.
“It’s critical that we harness this potential and give universities the tools they need to translate cutting edge research into exciting UK businesses that start and grow in the UK.”
- Science and Technology Secretary, Michelle Donelan, said:
“Turning new ideas and innovations into blossoming businesses is the bedrock of a vibrant economy and our £20m investment will drive more successful UK spinout companies like Oxford Nanopore and Darktrace, ensuring world-class research translates into world-leading industries.
“At the same time, we need clear rules on the stakes held by universities which offer world class facilities and expertise to get those companies off the ground, so we can back future generations of innovators, in turn creating more local jobs and growing our economy.”
- Co-leads for the independent review Professor Irene Tracey CBE, FRS, FMedSci, Vice-Chancellor of the University of Oxford, and Dr Andrew Williamson, Chair of the Venture Capital Committee at the British Private Equity & Venture Capital Association (BVCA) and Managing Partner of Cambridge Innovation Capital, said:
“The UK’s world-class university sector is a crucial driver of economic growth and innovation. Over the past eight months, we have engaged extensively with the major stakeholders in the UK’s university spin-out ecosystem. Today’s publication of our review and its recommendations are the culmination of this extensive work. We propose a set of spin-out terms and practices designed to foster a more collaborative and sharing environment among academia, entrepreneurship, and investment.
“Our hope is that this will increase the number of spin-outs, reduce the time to negotiate licenses, and increase the spin-out’s success rate. It was a privilege to contribute to this report and we are extremely grateful to our colleagues for their willingness to engage in the review, and especially the advisory board. Across diverse sectors, including AI, quantum computing, advanced therapeutics, diagnostics, and climate tech, university spin-outs across the UK are rapidly generating economic growth, societal impact, and fulfilling career opportunities for the next generation.”
- Responding to the recommendations set out in the Independent Review of Spin-outs Anne Lane, CEO of UCL Business (UCLB), said:
“For 30 years, UCLB has created successful spinout businesses from UCL’s ground-breaking research, which have raised £2.75 billion investment in the last 5 years alone. As well as creating jobs and economic impact, these spinouts scale up solutions to complex societal challenges, from reducing carbon emissions to therapies for rare hereditary diseases.
“The recommendations published in this review will help universities harmonise the creation of spinouts. We look forward to working even closer with fellow universities, government, and the investment community to ensure a healthy and sustained flow of investment back into academic research whilst supporting the emerging world-changing businesses of the next 30 years.”
- Professor Sir Anton Muscatelli, Principal and Vice-Chancellor of the University of Glasgow, said:
“I very much welcome the findings and recommendations of this Review and believe wholeheartedly in the untapped potential for innovation and entrepreneurship within our universities across the UK. Our institutions are at the forefront of the groundbreaking R&D which can drive productivity and economic growth across the country, and to be globally competitive we must ensure we are creating a framework which is investor-friendly, founder-friendly, nurtures university spinouts and unleashes this untapped potential.
“Universities like mine are developing the technologies needed to fuel the UK’s economy and tackle the greatest challenges facing the world, so it is very welcome to see the UK Government recognise the integral role our institutions can play in facilitating the creation of new ventures to bring new ideas and breakthrough innovations to market. As a sector we look forward to working together with the Government in the months ahead to deliver the ambitions set out in the Review.”
- Michael Moore, Chief Executive, British Private Equity and Venture Capital Association said:
“The independent university spin-out review is a hugely welcome statement of intent. Private capital has an important role to play by bringing both investment and expertise together to transform the world class research in UK universities into world class businesses. The recommendations in this review can help to generate ways to get more capital working together with the best ideas to achieve that.”
- Julia Hawkins, Partner at LocalGlobe said:
“Turning the UK’s world-leading science and innovation into viable global businesses takes so much more than just IP and investment. We applaud the recognition in this review that founders benefit from the support of experienced investors, who are also seasoned company builders. At Phoenix Court we co-founded the Newton Fellows program to help train the next generation of investors and entrepreneurs, and we especially welcome spinout founders and investors. We are also working with interns from PhD/Postdoc programs who are looking to gain experience of the investment and entrepreneurship worlds, and we want to do more in this area. And we have long argued that founders should not give up too much equity in their businesses and are delighted to have joined the TenU working group to recommend appropriate terms to help spinouts achieve market competitive terms that both incentivise and reward.”
- Steve Bates OBE, CEO of the UK BioIndustry Association (BIA), said:
“Spin-outs are the lifeblood of life science innovation ecosystem. This report shows that the UK university spin-out process is getting simpler, faster, and more repeatable. This is creating a virtuous circle of increased deal flow, more life science companies and investor confidence in the UK.
“People moving easily both ways between academia and industry is key to successful research translation. This report demonstrates practically just how highly-connected the UK’s unique life science innovation ecosystem is. It’s because of this collaboration that I’m confident the report’s recommendations will be delivered.”
- Tim Bradshaw, CEO of the Russell Group, said:
“We’re pleased this review highlights the enormous value spin-outs have added to the UK economy and demonstrates the vital role universities play in commercialising research and enabling new enterprises across a range of industries to flourish.
“These businesses simply would not exist without the resource, skills, and investment of our world-leading universities as well as support from the investor community and Government.
“In turn, university spin outs have created thousands of high value jobs right across the country, and we are eager to do even more.
“We look forward to working closely with the Government and investors to build on the momentum from this review to ensure we can not only sustain but hopefully grow the already thriving UK spin-out eco-system.”
- Vivienne Stern, CEO of Universities UK, said:
“We welcome this review’s recognition of the positive impact and important role that university spin outs have on driving growth and supporting the national and local economy. We support the ambitions of the review for universities, investors and Government to come together and work collaboratively to maximise opportunities for university spinout activity. University spin outs create thousands of jobs across the UK and will play an important role in driving the economic growth and local regeneration that the country needs.”
British Business Bank
- The British Business Bank (BBB) has engaged widely with the market to explore the case for government to play a greater role in establishing investment vehicles to allow pension schemes to invest quickly and effectively in UK unlisted growth companies, building on the skills and expertise of the BBB’s commercial arm.
- The organisations, listed below, have confirmed that they are supportive of the government’s ambitions to encourage additional institutional investment into UK venture and growth assets, and that a government established vehicle run by the BBB could be a valuable addition to the market, alongside other vehicles that already exist or are in development.
- They have also confirmed their availability for continued engagement with the BBB to help design this vehicle to meet schemes’ needs, alongside the wider work of government and the market to establish suitable vehicles.
- Aviva, L&G, M&G, Smart Pension, Aegon, Phoenix, AON and USS