A] Prelude
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B] The Launch
The UK government has officially launched the National Wealth Fund and announced reforms to other public institutions to encourage additional pension fund investment into high-growth UK companies. The UK Infrastructure Bank is to be overhauled and rebranded as the National Wealth Fund.
The announcement was made by chancellor Rachel Reeves at the government’s International Investment Summit in London. The fund is to receive £27.8bn and an expanded investment remit to support the government’s new industrial strategy. Its remit includes work to boost private sector investment into UK businesses and assets, as well as providing “commercial and financial advisory services” and lending to local authorities.
The Universities Superannuation Scheme and Brunel Pension Partnership were members of the task force advising on the National Wealth Fund’s creation. John Flint, CEO of the UK Infrastructure Bank, is to be the National Wealth Fund’s first CEO. He said: “It is a huge privilege to be entrusted with the responsibility of leading the National Wealth Fund.”
“Building on the strong foundations we have laid as UK Infrastructure Bank, we will hit the ground running, using sector insight and investment expertise that the market knows and trusts to unlock billions of pounds of private finance for projects across the UK. With additional capital to deploy against a bigger mandate, we stand ready to help the market invest with confidence, in support of the government’s growth ambitions.”
C] Sophisticated partnership
The official announcement of the fund also explained that it would “take on a more sophisticated partnership role with government departments… to accelerate policy development which supports and grows the market”. “The National Wealth Fund is set to play a crucial role in crowding-in critical private sector investment into major UK infrastructure and this is a welcome next step along a promising path.”
By the end of the current financial year, the government plans to publish the National Wealth Fund’s role, principles, success metrics and strategic priorities. Rebecca Lea, manager for investment and climate at the Association of British Insurers, said: “The National Wealth Fund is set to play a crucial role in crowding-in critical private sector investment into major UK infrastructure and this is a welcome next step along a promising path.”
She added that the association would work with the National Wealth Fund to help facilitate pension providers and insurers to invest more in UK assets using “blended finance solutions” to mitigate initial risks inherent in early-stage infrastructure projects. “We’re committed to investing over £100bn in UK productive assets over the next decade and the modern industrial strategy and the National Wealth Fund will both be pivotal to getting this investment flowing.”
D] British Business Bank boost
Meanwhile, the British Business Bank is to establish a new initiative called the British Growth Partnership, aimed specifically at encouraging more investment from pension funds into small and high-growth UK companies. “By unlocking hundreds of millions of pounds of domestic investment for the UK’s high growth businesses through the creation of the British Growth Partnership, the UK can capture the full commercial potential of its world-class breakthrough technology companies, providing a legacy for future generations of pensioners” according to Louis Taylor, British Business Bank.
The partnership, which is subject to regulatory approval, will be independent of government and will aim to start deploying capital in the second half of next year. Louis Taylor, CEO of the British Business Bank, said: “These companies have the potential to drive productivity, jobs and growth, and will support the UK to be internationally competitive in the industries of the future.
“By unlocking hundreds of millions of pounds of domestic investment for the UK’s high growth businesses through the creation of the British Growth Partnership, the UK can capture the full commercial potential of its world-class breakthrough technology companies, providing a legacy for future generations of pensioners.”
The government is to reform the framework governing the British Business Bank, including making its commercial programmes – worth almost £8bn – permanent. Taylor said this meant the bank could reinvest returns to “increase growth and prosperity across the UK”.
E] Industrial strategy
Announcing the new industrial strategy yesterday, prime minister Sir Keir Starmer pledged to “rip up the bureaucracy that blocks investment”. “We will march through the institutions and make sure that every regulator in this country, especially our economic and competition regulators, takes growth as seriously as this room does,” he said.
The statement follows calls from organisations including the Pensions and Lifetime Savings Association for the government incentivise, rather than mandate, UK pension fund investment into productive finance. Business secretary Jonathan Reynolds added that the new strategy would “hardwire stability for investors and give industry the confidence to plan for the next 10 years and beyond”.
In a green paper setting out the strategy, Reynolds and chancellor Rachel Reeves set out eight sectors of focus, including advanced manufacturing, clean energy industries, creative industries, defence, digital and technologies, financial services, life sciences, and professional and business services.