Some of the largest pension schemes and investors are exploring allocations to a scale-up fund dedicated to UK businesses, according to an announcement from the government. Nest, Railpen, and three Local Government Pension Scheme pools are all in talks about how to establish an institutional-style investment fund to help UK businesses scale up using pension capital.
The move is the latest in a series of initiatives aimed at getting UK institutions to invest in UK companies during a development stage in which historically most funding comes from abroad, in particular the US. The government wants the new vehicle to reach £1bn in size for investment into UK businesses.
Andy Burnham, the new prime minister, said the new fund would “help unlock good growth in every postcode, connecting pension investment with the entrepreneurs and technologies that will reindustrialise Britain and create the jobs of the future”. Chancellor John Healey added that the UK should become the best place in the world both to start and scale a business, with investment, jobs and skills in every region.
The fund would target opportunities in science and technology, according to a government press release, with the British Business Bank working alongside pension investors to connect them to potential investment opportunities. Railpen has been a leading investor in the UK’s science and technology sector for some time, and last year called for the creation of a ‘scale-up’ capital fund.
Jonathan Reynolds, secretary of state in the newly established Department of Business, Innovation, Science and Trade, said the institutions’ involvement was “an important vote of confidence in UK innovation”. Michael Moore, chief executive of UK Private Capital, welcomed the new fund and urged stakeholders to “build on this momentum”.
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Elisabeth Storey, head of pensions at RSM UK, warned that trustees must balance the pressure to invest in specific asset classes with their fiduciary duty. “Pension schemes have an important role to play in supporting economic growth, but trustees will need confidence that any increased allocation to growth assets is supported by strong governance, appropriate expertise, and a clear investment rationale,” Storey said.
As the discussions progress, the UK scale-up fund represents a compelling investment opportunity where disciplined, patient capital can help growing companies scale, provide attractive returns for pension savers and generate lasting economic growth.
They will need to work together to establish the fund and ensure its success. This will require careful planning, strong governance, and a clear investment strategy. As Andy Bord, CEO of Railpen, said, “By bringing together long-term pension capital with the UK’s most ambitious growth businesses, we have the opportunity to create a virtuous cycle – supporting innovation, attracting further private investment, and delivering strong long-term outcomes for pension savers”.
The UK government has stated that the fund will target opportunities in science and technology, which is a key sector for the country’s economic growth. The science and technology sector in the UK is a significant contributor to the country’s economy, and initiatives like the scale-up fund will be essential in supporting its continued growth and development, including addressing financial risk to the economy.
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