The UK Chancellor, Jeremy Hunt, has announced a £320m plan designed to drive innovation and unlock the first tranche of investment from his Mansion House Reforms.

Hunt previously unveiled proposals for a raft of reforms at his Mansion House speech earlier this year, suggesting that the changes could increase a typical earner’s defined contribution (DC) pot by 12 per cent and “unlock” up to £75bn of additional investment.

The Chancellor has now announced the next steps in delivering these reforms, with new support to be provided for investment vehicles tailored to the needs of pension schemes, allowing investment into the UK’s innovative companies.

In particular, the government will commit £250m to two successful bidders under the Long-term Investment for Technology and Science (LIFTS) initiative, subject to contract.

Alongside this, the government has announced that a new Growth Fund will be established within the British Business Bank to complement private investment vehicles.

The Growth Fund is expected draw on the BBB’s strong track record and a permanent capital base of over £7bn to give pension schemes access to opportunities in the UK’s most promising businesses.

News of the growth fund has already been welcomed by eight pension schemes and fund managers as a potentially valuable addition to the market: Aviva, L&G, M&G, Smart Pension, Aegon, Phoenix, Aon and the Universities Superannuation Scheme (USS).

Building on the recent Venture Capital Investment Compact, which also announced a number of new signatories today (21 November), the package also includes measures to further strengthen the UK’s renowned venture capital industry.

As part of this, a new Venture Capital Fellowship scheme will be launched to support the next generation of investors in venture capital funds.

Commenting on the reforms, Hunt stated: “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.”

Hunt confirmed that the government will also be looking to inject £20m to foster more ‘spin-out’ companies, firms created using research done in universities, as well as providing at least £50m additional funding for the British Business Bank’s ‘Future Fund: Breakthrough’ programme.

The plans were announced at the same time as the Chancellor has been convening with representatives from several universities and investors at University College London (UCL) East where they will endorse a new set of ‘best-practice policies’ that were recommended as part of an independent review of spin-outs.

Announcing the plans, the Treasury explained that while spin-out companies raised £5.3bn in investment in 2021-22 alone, many spin-outs deals in the past were created from scratch, which is inefficient.

In light of this, the review outlined a number of policies that universities and investors should adopt to make the UK the best place in the world to start a spin-out company.

This includes recommendations to speed up the process and build on TenU’s University Spin-out Investment Terms (USIT) Guide by recommending 10-25 per cent university equity for life sciences spinouts, and 10 per cent or less for less IP-intensive sectors.

The Chancellor has accepted all the recommendations and will set out his full response as part of the Autumn Statement tomorrow.

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