British Business Bank Response

Commons Business and Trade Committee: Financing the real economy Inquiry

September 2025

Executive Summary

 

The British Business Bank (the Bank) is the UK’s economic development bank with a clear purpose: to drive sustainable growth and prosperity by improving access to finance for smaller businesses. In 2024/25, the Bank deployed £1.2bn of public capital alongside £2.6bn of lending guaranteed, unlocking a total of £6.8bn in finance for SMEs. Of this, £3.0bn was private capital crowded in, demonstrating the Bank’s catalytic role in leveraging significant private investment alongside taxpayer funds.

 

A core focus for the Bank is supporting the UK’s scale-up businesses, particularly those in breakthrough technologies such as life sciences and deep tech. Through its patient capital activities, the Bank has committed significant capital to deepen later stage funding markets and thereby help firms overcome the late-stage funding gap, securing strong returns while enabling these high-growth businesses to remain and expand in the UK. With the launch of the forthcoming British Growth Partnership (BGP), the Bank is also mobilising domestic pension fund capital into the UK’s innovation economy, providing long-term investment at scale that is vital for scale-ups.

 

The Bank also plays a pivotal role in tackling regional disparities in access to finance. Its £1.6bn Nations and Regions Investment Funds (NRIF) are addressing structural barriers outside London and the Southeast, already making strong progress across Scotland, Wales, Northern Ireland, the Midlands, and the North of England. Building on their success, the Bank is launching two new NRIFs totalling £350m for the East and Southeast, while also deploying an additional £100m into existing NRIFs to strengthen innovation clusters through the introduction of dedicated Cluster Champions. Complementing these efforts, the Bank is expanding its Regional Angels Programme (RAP)—which has already facilitated over £100m in early-stage equity investment—to further address regional imbalances in startup funding. These funds are ensuring that ambitious businesses across the country can access the capital they need to innovate, scale, and create jobs, rather than being held back by geography.

 

In parallel, the Bank supports investment readiness, helping SMEs build the financial understanding and confidence to secure growth capital. Initiatives such as Start Up Loans (SUL), the UK Network, and the Finance Hub equip businesses with mentoring, planning tools, and impartial information.

 

Above all, the Bank plays a catalytic role in crowding in private finance. Over the past decade, the Bank has achieved more than £4 of private investment for every £1 of public funds, mobilising £26bn of private capital alongside £6.3bn of government investment. With an expanded £25.6bn capacity, the Bank is now positioned to deepen UK growth capital markets at every stage—from seed to scale-up—while attracting long-term institutional investment into the country’s most innovative businesses.

 

In conclusion, the Bank is a central tool to unlocking the UK’s growth potential. By combining scale-up support, regional investment programmes, and its proven ability to catalyse private capital, the Bank ensures that high-growth businesses across the UK can thrive. This not only strengthens the UK’s position as a global science and innovation leader but also delivers inclusive, broad-based prosperity across all nations and regions in support of the government’s economic growth mission.

Contents

Introduction

What challenges do UK businesses face in accessing growth finance—especially at the scale-up stage?

Scale-up challenges

Strong venture capital performance

The capital gap for breakthrough companies

International comparisons

Gaps at the top of the market

Patient Capital Funds

Future Fund: Breakthrough

Long-Term Investment for Technology and Science

Regional funding challenges

Place-based access to finance

Clusters and the Golden Triangle

Nations and Regions Investment Funds

Investment readiness challenges

Access to information and asymmetric information

Network gaps and opportunity costs

The Bank’s current information readiness offer

What gaps exist in venture capital or SME lending markets, and what’s the impact?

Structural barriers in SME lending markets

Disparities in access for underrepresented groups

Community ENABLE Funding

What is being done to mobilise pension fund reform, scale-up support, and regional capital deployment?

Pension fund reform and scale-up support

Regional capital deployment

What support do businesses need to become investment-ready, and how can government or industry provide it?

How are UK policy institutions like the British Business Bank, National Wealth Fund and DBT working to ‘crowd in’ private finance?

The Bank’s approach to crowding in private capital

Industrial Strategy Growth Capital

 

 

Introduction

 

  1. The British Business Bank (the Bank), established in 2014, is the government's economic development bank. The Bank has the mission to drive sustainable growth and prosperity across the UK, and to enable the transition to a net zero economy, by improving access to finance for smaller businesses.

 

  1. The availability of capital to smaller businesses drives economic growth because it enables business investment, innovation, and expansion, leading to increased productivity, job creation, and overall economic development.

 

  1. In July 2025, the Bank published an Impact Report[1] alongside our Annual Report and Accounts. The report looked at how the Bank’s activity in 2024 directly supported the country’s economy, what outputs and outcomes are generated, and what impact we can expect from our activities over the longer term.

 

  1. In calendar year 2024, the Bank deployed a total of £1.2bn of finance into smaller businesses. This enabled the Bank to:

 

  1. The expected impacts over the life of this finance are:

 

  1. This response will reflect the Bank’s experience as both a market participant and as a centre of expertise on smaller business finance in the UK. As a government-owned entity, the British Business Bank is not in a position to comment on some of the Inquiry’s questions around macroeconomic policy levers, seekers of capital, regulatory framework or broader public spending priorities. The remainder of this response is laid out in accordance with the topics as ordered in the Inquiry’s call for evidence.

What challenges do UK businesses face in accessing growth finance—especially at the scale-up stage?

Summary: The UK boasts a world-class research base, a leading role in global VC markets, and competitive VC fund performance, yet its businesses still face persistent challenges in accessing growth finance. Breakthrough technology companies struggle to secure the scale-up capital needed to commercialise R&D, with domestic patient capital far behind international peers such as the US, Canada, and Australia. This funding gap is compounded by regional disparities, with investment heavily concentrated in London and the Southeast, leaving high-potential firms elsewhere underserved. Smaller businesses also face barriers from limited financial knowledge, asymmetric information, and weaker investor networks, which reduce both applications for finance and visibility to potential backers. In response, the Bank has developed a suite of interventions—including Patient Capital Funds, NRIFs, and information-readiness initiatives—to expand patient capital, reduce regional imbalances, strengthen local finance ecosystems, and improve SMEs’ ability to access and deploy growth finance effectively.

 

Scale-up challenges

Strong venture capital performance

 

  1. The UK is home to world-leading research and development, with three of the top 10 universities globally. It is also home to the world’s third largest tech ecosystem (by volume of VC investment, behind only the US and China), and hosts 40% of Europe’s venture capital. This provides fertile ground for innovation to thrive.

 

  1. The UK has overtaken India as the third largest VC market in the world, behind only the US and China, and accounting for 5.8% of global investment in 2021–2023. The UK also leads the European continent for share of global VC investment with 5.8% in 2021–23 (ahead of Germany with 2.5% and France with 2.3%[2]). These achievements highlight the strength of the UK’s ecosystem and its ability to attract international capital.

 

  1. This strong position is underpinned by evidence of competitive returns. Research from the Bank’s UK Venture Capital Financial Returns 2024 report finds that UK VC returns were above the US and the rest of Europe for older vintages and are in line with or slightly below for more recent vintages[3]. Historically, US VC financial returns were perceived by many commentators to be substantially higher than UK funds. However, for 2002–2019 vintages, UK VC funds generated a pooled TVPI multiple of 1.87, compared to 2.01 for US funds and 1.96 for funds in the rest of Europe. Looking at specific vintage year cohorts, UK funds outperformed other markets during the vintage period after the dot-com bubble. UK funds established across the 2002–2007 vintage period outperformed both the US and the rest of Europe on both DPI and TVPI measures[4]. For more recent 2014–2022 vintages, while portfolio valuations are continuing to be marked down amid more challenging market conditions, the UK’s pooled return (1.64) is in line with the US (1.63) but below the rest of Europe (1.76).

 

The capital gap for breakthrough companies

 

  1. Despite these strengths and the positive developments in the market, the UK faces a persistent scale-up capital challenge that is accentuated in some sectors, notably deep tech and life sciences. Breakthrough technology companies, and the commercialisation of UK R&D that they embody, are critical to strengthening the UK’s position as a science superpower. These companies have the potential to both disproportionately drive productivity and living standards and will support the UK to be internationally competitive in the industries of the future. However, the ability of these companies to scale is constrained by access to scale-up capital. Due to high research and development costs, breakthrough technology companies typically require more capital than other companies to take their products to market. UK breakthrough technology companies raise a similar number of rounds to their US counterparts; however, they receive significantly less funding overall on a GDP-weighted basis.

 

International comparisons

 

  1. The relative lack of domestic patient capital is stark when compared internationally. Retirement savings make up just 10% of Britain’s venture capital pool, compared to 72% in America. Pension funds in Canada invest 15 times more in private equity and venture capital start-ups than their equivalents in the UK. In Australia, in a more developed DC market, around 20% of DC pension fund assets are in illiquid private market investments; Australia has also been the top performing DC pension market over the last 20 years with annualised asset growth of 11.3%. One consequence of low levels of UK institutional capital into scale-up companies is that those UK companies that receive overseas investment are more likely to exit abroad, representing significant unrealised economic potential for the UK.

 

Gaps at the top of the market

 

  1. The Bank’s report also confirms that there is still a performance gap between the top UK and US funds. Looking at the highest performing funds from 2002–2019, only 1 in 10 UK funds have a reported TVPI multiple of three or higher, while in comparison 15% of European funds and 14% of US funds fall into this category. So, while the UK has a relatively high share of funds demonstrating positive performance, it still lags behind comparator markets at the very top end.

 

Patient Capital Funds

 

  1. As the largest investor in UK venture and venture growth capital funds, the Bank is already enabling greater availability of patient capital to help build the UK’s innovation economy and has an existing long-term commitment to growth investment in high potential firms.

 

  1. In 2018 and following the outcome of the Patient Capital Review, the Bank established Patient Capital Funds with £2.5billion of resources.  Its objective was to develop later stage venture capital markets and thereby enable long-term investment in innovative UK companies led by ambitious entrepreneurs who want to build successful, world-class businesses. By focusing on the late-stage funding gap, the Bank is helping to ensure high-growth UK companies have access to the right type of funding at the right time in their life cycle, supporting them as they expand, create jobs, develop products and enter new markets. Across all its activities, Patient Capital Funds invests on a commercial basis to deliver competitive returns for the UK taxpayer. By demonstrating that a patient capital approach can produce commercially attractive returns, we are encouraging other UK institutional investors to invest in the asset class, to both drive and benefit from the success of our high-growth companies.

 

  1. Patient Capital Funds has committed £2.287bn across 80 funds, ten co-investments and 18 Future Fund: Breakthrough (FF:B) deals. It manages assets with a total value of £3,125m. The funds in which Patient Capital Funds has invested have raised a further €13.4bn from third party investors. Performance since inception remains robust, with a total gain of £427m (realised and unrealised). The total portfolio Internal Rate of Return (IRR) since inception for the core programme was 12.5% to end of March 2024. The portfolio Total Value to Paid-in (TVPI) for the core programme was 1.38x. Patient Capital Funds seeks best-in-class fund managers with a strong UK focus, and verifiable track record. The Bank’s core funds programme does not have a sector-specific allocation, although it does invest with fund managers that invest in specific themes, and those that can leverage sectors and verticals where the UK is traditionally strong such as life sciences, deep technology and financial services. An independent evaluation of Patient Capital Funds showed that the valuations of beneficiary companies were found on average to be £60m higher than they would have been in absence of the Bank-backed funding; and that the Bank’s investment is having a wider economic impact. It also showed that Bank-backed firms are likely to generate economic benefits of £5.1bn by 2030/31[5].

 

Future Fund: Breakthrough

 

  1. In 2021, the Bank launched two new programmes, the £200m Life Sciences Investment Programme and the £425m FF:B programme. In March 2023 Patient Capital Funds was extended until 2033. This recognises our track record and the important role the business plays in providing the long-term investment that fast-growing companies need to scale up. Through FF:B, the Bank is now the most active investor in later-stage life sciences and deep tech businesses in the UK. In November 2023 the FF:B programme was extended with at least an additional £50m to invest in high-growth, innovative firms. It now totals £425m. An independent evaluation of FF:B published in March 2024 found that the programme is already delivering tangible results—supporting R&D-intensive companies to scale, boost employment, and accelerate the commercialisation of cutting-edge innovations[6].

Long-Term Investment for Technology and Science

 

  1. In addition to the FF:B, the Bank designed the Long-Term Investment for Technology and Science to create new vehicles that attract UK institutional capital—particularly Defined Contribution pension funds—into UK science and technology growth assets. In November 2024, the Bank completed a £250m commitment alongside Phoenix Group’s £250m through Schroders Capital to establish a £500m vehicle accessible to pension funds and other institutions. This model is intended to generate over £1bn of new investment into UK science and technology, building a scalable pathway for domestic institutional participation in later-stage growth.

Regional funding challenges

Place-based access to finance

  1. In the UK, and despite its status as a global leader in financial services, a stark and well-evidenced disparity exists that compounds this challenge: high growth businesses outside major hubs such as the 'Golden Triangle' often struggle to access critical private investment, particularly early-stage equity but also private debt, hindering their growth and limiting the UK's innovation and growth potential.

 

  1. The Bank's Nations and Regions Tracker 2024 provides compelling evidence of this persistent imbalance. London's dominance in equity funding remains stark, capturing 49% of the UK's deal count and 63% of total investment value, while the number of deals outside London fell by 22% on an annual basis and total investment fell by 48%. [7]

 

  1. For many regions, lack of investment and associated support in local ecosystems, compounded by socio-economic barriers, financial awareness gaps, and geographical distance from investor networks, can stifle not only business growth but also the development of clusters that can drive regional growth. These challenges exacerbate regional disparities and stall broader economic progress, which is why the Bank originally created regional funds to address these issues.

 

  1. Regional confidence in accessing finance varies substantially across the UK, ranging from 52% in Scotland to 77% in Northern Ireland, demonstrating that geographic location directly influences business leaders' perceptions of finance accessibility[8]. Wales, the Northwest, and the Southwest stand out with around 4 in 10 smaller businesses feeling they would not be able to access finance at reasonable rates. These confidence gaps translate directly into reduced applications for growth finance, creating self-reinforcing cycles of underinvestment that compound regional economic disparities.

Clusters and the Golden Triangle

  1. As well as overall regional growth, the UK has multiple clusters often linked to universities' research activities and with strengths in certain sectors. These clusters can be pivotal to regional economic growth by attracting and supporting high growth potential businesses. While cluster ecosystems in the Golden Triangle demonstrate strong agglomeration effects, others struggle to develop due to a series of interlinked issues. This includes insufficient follow-on capital caused by limited access to private investors, and thin markets in expert services such as legal and financial advice, and access to incubators and accelerators. Equity deal activity declined across all UK Nations and regions in 2023, with seed stage activity particularly impacted outside London, which saw a 35% decrease in deal numbers and 36% decrease in value, compared to 25% and 26% in the capital respectively[9]. Geography further compounds information failures. Awareness of finance options varies dramatically across the UK, with regions such as Scotland and Wales reporting that over 70% of smaller businesses feel uninformed about alternative finance, compared to 55% in London[10].

Nations and Regions Investment Funds

  1. The Bank has implemented a phased regional capital deployment initiative to ensure priority delivery in the areas with most pressing need. The £1.6bn NRIFs started launching in July 2023 with the Southwest Investment Fund to the launch of NPIF II launched in March 2024. The NRIF programme addresses identified finance and demand gaps to tackle structural barriers to finance that hinder growth and innovation across the UK. The core purpose of the programme is to increase the supply and diversity of early-stage finance for UK smaller businesses, providing funds to firms that might otherwise not receive investment and helping to reduce disparities in access to finance. NRIF targets high growth businesses while also maintaining support across wider SME population, balancing commercial return and inclusive access, allowing regional SMEs with strong potential to scale, but without excluding foundational firms that experience barriers to finance.

The recent NRIF programmes are already making strong progress in reaching businesses and deploying capital across the UK:

 

  1. A core strength of the NRIF model is its proven ability to target support towards ambitious businesses that would likely struggle to secure finance elsewhere— at all or at the same time/scale. Evaluations of MEIF and NPIF estimate that 83%–84% of investments met this criterion, demonstrating high finance additionality both for debt and equity. The NRIF model also requires fund managers to have a regional presence and actively seek investment opportunities across the entire region leading to partnerships with challenger and specialist lenders, which helps build demand (and referrals into the programme) and strengthen local finance ecosystems, particularly in regions where traditional banks have reduced their presence

 

  1. By funding a large and geographically spread group of businesses, the Bank is helping to unlock significant benefits throughout the UK and supporting clusters through our interventions. 84% of the 24,000 new businesses we supported in 2024/25 were based outside of London (slightly higher than the 82% of businesses based in those regions), demonstrating how the whole of the UK benefits from the funding we catalyse.

 

  1. Ultimately, the significant impact of NRIF and its predecessors on regional growth is evidenced by evaluation studies[11] and estimates produced for the Bank’s 10-year impact study[12] (NPIF, MEIF, CIoSIF).The latter suggests investment in these programmes over the last decade is expected to create 12,120 additional jobs and £1.2 billion in GVA over the life of the finance.[13] 

Investment readiness challenges

Access to information and asymmetric information

  1. Despite the variety of finance products available, smaller businesses face imperfect information that prevents them making rational, informed choices. The Bank’s SME Intermediary Survey 2024 highlights that 74% of smaller businesses report limited understanding of early-stage equity, while 75% lack awareness of alternative debt options[14]. This confusion over the benefits and characteristics of different finance types means many smaller businesses cannot accurately assess which instruments best suit their growth objectives, undermining their ability to plan strategically and optimally deploy external finance.

 

  1. A further barrier lies in asymmetric information, where smaller businesses systematically underestimate their chances of successful applications. Our research shows that 58% of businesses that identify a finance need but choose not to apply cite fear of rejection, despite anecdotal evidence that many such businesses would have been approved with appropriate support[15]. Compounding this, only 38% of smaller businesses prepare detailed financial forecasts or business plans before seeking finance, leaving lenders and investors unable to fully appreciate business prospects and heightening perceived risk.

Network gaps and opportunity costs

  1. Access to equity and venture capital is heavily influenced by professional and personal networks. The Nations and Regions Tracker 2024 demonstrates that businesses in regions with fewer investor networks—such as the North East and Yorkshire & Humber—report 68% lower awareness of local equity investors compared to London and the Southeast[16]. This network gap means many high-potential smaller businesses never enter investor pipelines, remaining invisible to the very finance sources they need for scaling.

 

  1. Most smaller businesses rely on their main bank for finance rather than exploring the market. The SME Intermediary Survey reveals that only 23% of businesses actively “shop around” for finance, citing the time and cost involved in multiple applications as prohibitive[17]. As a result, many smaller businesses accept the first offer or defer growth decisions, even when better terms or more suitable products exist elsewhere.

The Bank’s current information readiness offer

  1. To ensure UK smaller businesses can make rational, informed finance choices and position themselves to attract growth capital, the Bank has developed a comprehensive suite of interventions that complement wider government support. These interventions focus on two pillars:

 

  1. The Bank’s core information and finance readiness offer includes several targeted initiatives:

 

  1. Through these interventions, the Bank support smaller businesses in understanding the full range of finance options—from Start Up Loans to Series C+ venture capital. Businesses are better equipped to develop robust financial plans and forecasts, improving their chances of securing funding. Ultimately, smaller businesses spend less time searching for finance and more time making strategic decisions, enhancing their growth potential.

What gaps exist in venture capital or SME lending markets, and what’s the impact?

Summary: SME lending gaps in the UK are holding back business growth, with high credit costs, risk aversion, and deleveraging discouraging many firms from borrowing. Underrepresented groups—such as women-led and ethnic minority-led businesses—face even greater barriers, including higher rejection rates, smaller loan sizes, and limited awareness of finance options, despite often showing stronger growth ambition. These gaps represent significant untapped economic potential and contribute to regional and social inequalities. To help close them, targeted initiatives are expanding affordable finance through community lenders and supporting smaller finance providers to extend funding to underserved SMEs.

 

Structural barriers in SME lending markets

 

  1. The Bank’s 2025 Small Business Finance Markets Report provides a detailed analysis of the SME funding landscape, identifying persistent gaps in lending that may affect business growth and economic development. The proportion of smaller businesses using external finance declined from 50% in Q3 2023 to 43% in Q2 2024, stabilising at that level[18]. This represents a trend where fewer businesses are accessing external finance, even though the aggregate value of finance available has increased. Moreover, a significant barrier to business investment finance is the high cost of credit, with 58% of businesses citing credit being too expensive[19] as a reason for underinvestment, and 55% unable to borrow at reasonable rates. Additionally, 77% of businesses cited risk aversion and 75% cited deleveraging as main motives behind low demand for finance. These barriers particularly impact smaller businesses' ability to invest in growth, productivity improvements, and innovation.

 

Disparities in access for underrepresented groups

 

  1. The report identifies substantial gaps affecting underrepresented groups:

             

  1. The barriers facing underrepresented entrepreneurs represent significant untapped growth and economic potential. Despite facing access challenges, these businesses often demonstrate higher growth ambition - for example, ethnic minority-led businesses are more willing to use finance to grow but encounter systematic barriers that prevent them from accessing it[20]

 

Community ENABLE Funding

 

  1. To address these identified gaps, the Bank has developed the Community ENABLE Funding (CEF) Programme. Expected to support up to £150m of lending over the next two years, CEF specifically targets underserved communities through Community Development Finance Institutions (CDFIs), with the overall purpose of increasing the supply of debt finance to smaller businesses. This means they can better support SMEs, especially those in underserved communities, by increasing the availability of finance.

What is being done to mobilise pension fund reform, scale-up support, and regional capital deployment?

Summary: The UK is mobilising pension fund reform, scale-up support, and regional capital deployment to unlock long-term investment for high-growth businesses and spread opportunities more evenly across the country. The BGP will channel hundreds of millions of pounds from domestic pension providers into breakthrough technology companies, helping capture their commercial potential while delivering long-term value for savers. Alongside this, reforms will put the Bank’s £7.9bn commercial programmes on a permanent footing, enabling reinvestment of returns into future growth. Regionally, £2.6bn of new capital will be deployed through expanded NRIFs, targeted equity and debt for innovation clusters, and support for angel syndicates and diverse fund managers. These measures aim to reduce regional finance gaps, strengthen local clusters, and build a more inclusive and accessible investment ecosystem across the UK.

 

Pension fund reform and scale-up support

  1. Building on the foundations laid by Patient Capital Funds and FF:B, the Bank is also preparing to launch a major new vehicle: the British Growth Partnership (BGP). This initiative is designed to further expand the availability of long-term domestic investment for high-growth UK companies.

 

  1. At the International Investment Summit, it was confirmed the Bank will establish the BGP. In May, the Financial Conduct Authority granted regulatory approval to BBB Investment Services, the Bank’s third-party arm, to provide investment services to clients. This is an important first regulatory step in the preparation for the launch of the BGP. The BGP is currently raising its initial fund. The initial fund will seek to raise hundreds of millions of pounds, including a commitment from the Bank, to invest in some of the highest potential opportunities in the Bank’s venture capital pipeline. By unlocking hundreds of millions of pounds of domestic investment for the UK’s high growth businesses through the creation of the BGP, the UK can capture the full commercial potential of its world-class breakthrough technology companies, providing a legacy for future generations of pensioners.

 

  1. In November 2024, it was announced that Aegon UK and NatWest Cushon agreed to work with the new BGP with a view to making investments in the initial fund, as the Partnership prepares for launch in 2025. Both partners have also committed to continued collaboration with the Bank to provide input into the development of further products that access high-quality investment opportunities in UK growth assets. Industry reaction to this initiative has been positive, with eight pension providers managing total assets of over €350bn acknowledging that such a vehicle could be a valuable addition to the market.

 

  1. Investments from the fund will be made on a long-term, fully commercial basis, independent of government, leveraging the Bank’s capability and market access to a range of promising high-growth UK companies. This commercial, market-led approach is designed to ensure long-term value to the UK taxpayer. A set of reforms to the British Business Bank’s financial framework will put the Bank’s £7.9bn commercial programmes on a permanent footing. This means the Bank can flexibly re-invest its investment returns over the long term to increase growth and prosperity across the UK.

 

Regional capital deployment

 

  1. Building on the existing Bank interventions and as part of the Bank’ s People and Place 2025 Spending Review settlement to overcome systemic finance barriers outside the UK’s major hubs, the Bank will have a number of new programmes from April 2026 aimed at unlocking potential for UK entrepreneurs, regardless of their background or where they are located.

 

  1. The Bank is committing £2.6bn of capital to support entrepreneurs wherever and whoever they are to access capital, driving the growth of smaller businesses across the UK’s Nations and regions, including high-growth innovation clusters across the country. Some of the measures that this will include are:

What support do businesses need to become investment-ready, and how can government or industry provide it?

Summary: Businesses need better information, guidance, and tools to become investment-ready, alongside support that builds confidence and capability in securing finance. Many SMEs lack awareness of suitable funding options, struggle to prepare strong financial plans, or face barriers navigating the system. To address this, initiatives are being expanded to provide clearer, tailored guidance—such as an upgraded AI-enabled Finance Hub, interactive tools to match firms with region- and sector-specific finance, and targeted awareness campaigns. These sit alongside wider government and industry programmes that help firms improve productivity, innovate, export, and strengthen financial readiness. Together, these measures aim to ensure businesses can identify the right finance, present stronger cases to investors, and unlock growth opportunities.

 

  1. The Bank is adopting a new approach to investment readiness, which represents a step change in how demand generation is understood – moving from being an add-on to becoming a core element of each financial intervention proposed.

 

  1. To strengthen this offer, the Bank have an additional £3.5m in resources to enable the expansion of its investment readiness activity through three main strands:

 

  1. These activities sit alongside broader firm-level support — spanning business startup, productivity improvement, innovation, exporting and finance readiness — delivered by partners such as Innovate UK, UK Export Finance, Local Growth Hubs, the Bank Referral Scheme and Business Growth Service.

How are UK policy institutions like the British Business Bank, National Wealth Fund and DBT working to ‘crowd in’ private finance?

Summary: The Bank is actively using public capital to “crowd in” much larger volumes of private finance, helping smaller and high-growth businesses access the funding they need. For every £1 of public money, more than £4 of private finance has been mobilised, with mechanisms including cornerstone investments in venture funds, guarantee schemes that reduce lender risk, and targeted regional interventions to diversify finance providers. The Bank’s expanded £25.6bn capacity, alongside new vehicles like the BGP, is designed to unlock major pools of domestic institutional capital—especially pension funds—into innovative and high-potential firms. Complementary, the Industrial Strategy Growth Capital further strengthen this by supporting emerging managers and specialist funds in priority sectors such as clean tech and deep tech. Together, these efforts deepen UK capital markets, widen the investor base, and crowd in long-term private finance to drive innovation and economic growth.

The Bank’s approach to crowding in private capital

 

  1. Over the last decade, the Bank has consistently used public capital to catalyse larger volumes of private finance into smaller businesses. This has generated sustained leverage of more than £4 for every £1 of public funds, with £6.3bn of public funding drawing in £26.2bn through private capital and lending guaranteed; within that, £16.1bn was pure private capital invested alongside public funds (a 2.6x private co‑investment multiple)[21]. In 2024/25 alone, £6.8bn of finance reached smaller businesses, including £3.0bn of private capital crowded in, underpinned by £1.2bn of public funding deployed and £2.6bn of lending guaranteed.

 

  1. This catalytic effect has been delivered through four reinforcing mechanisms:

 

  1. The Bank’s capacity has also been scaled to do more of this: government has increased the Bank’s total financial capacity to £25.6bn, enabling annual investments of around £2.5bn and explicitly positioning the Bank to crowd in greater volumes of third‑party capital, including from institutional investors. In addition, the BGP has been established as a new vehicle to mobilise large pools of domestic institutional capital—especially pension funds—into UK venture and innovative companies.

 

  1. Mobilising private capital at scale is now a core objective within the Bank’s strategic mandate. The Bank will expand business opportunities by:

 

Industrial Strategy Growth Capital

 

  1. Under the £4bn Industrial Strategy Growth Capital, the Bank will strengthen growth capital supply and develop growth capital markets at every stage by crowding private capital into emerging growth sub‑sectors taking two complementary approaches:

 

  1. Combined with the scale afforded by the £25.6bn capacity and the launch of BGP, these steps will widen the Bank’s investor and lender base, deepen UK growth capital markets from seed through later stages, and crowd in significantly larger volumes of private finance—particularly long‑term domestic institutional capital—into the UK’s most productive and innovative businesses.

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14 

[1] British Business Bank, Impact Report 2025 (July 2025).

[2] British Business Bank, UK Venture Capital Financial Returns 2024 (November 2024).

[3] Ibid.

[4] Ibid.

[5] British Business Bank, Interim Evaluation of British Patient Capital (February 2023).

[6] British Business Bank, Interim Evaluation of Future Fund: Breakthrough (March 2024).

[7] British Business Bank, Nations and Regions Tracker (October 2024).

[8] Ibid.

[9] Ibid.

[10] British Business Bank, SME Intermediary Survey (March 2025).

[11] British Business Bank, interim evaluations of NPIF; MEIF; CIoSIF.

[12] British Business Bank, The Power of 10: 10 year impact (January 2025).

[13] Ibid

[14] British Business Bank, SME Intermediary Survey (March 2025).

[15] Ibid.

[16] British Business Bank, Nations and Regions Tracker (October 2024).

[17] British Business Bank, SME Intermediary Survey (March 2025).

[18] British Business Bank, Small Business and Finance Markets Report 2024/25 (March 2025).

[19] Ibid

[20] British Business Bank, Investing in Ethnic Minority Entrepreneurs (November 2023).

 

[21] British Business Bank, The Power of 10: 10 year impact (January 2025).