30 Sep 2022

View from Chancery Lane: Chris Elphick on plans for science scale up funding

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The UK Growth Plan 2022 - unpacking the LIFTS proposals
There was much to digest in Kwasi Kwarteng’s “mini-Budget” on 23 September, and aside from the good news on plans to extend the EIS/VCT sunset clause and bring forward reforms to the DC pensions charge cap, another positive proposal was the introduction of a Long-term Investment for Technology & Science (LIFTS) competition. The Growth Plan details a proposal to provide up to £500 million to support new funds designed by institutional investors and fund managers, to help increase private investment into UK science and technology businesses. There will be a short period of industry engagement led by the British Business Bank which will be followed by a call for proposals by the end of 2022 to identify fund structures and vehicles, with the intention that funds will be available from early 2023.

Over the past year, the BVCA has been part of the Life Sciences Taskforce which made recommendations in June this year. It was chaired by Kwasi Kwarteng while he was the Secretary of State for BEIS. The taskforce made a similar proposal based on the Tibi initiative, which was launched in January 2020 and is on track to secure its target of investing €6bn by December 2022 in French scale-ups. This gives us some idea as to what LIFTS may ultimately look like.

If LIFTS is designed in a similar way to the Tibi initiative, pledges will be made by institutional investors to the scheme and fund managers, including VCs, will pitch for funds that will invest in target areas. A third party then assumes the role of matchmaker, facilitating partnerships between the investors and the funds. The exact nature of these relationships and the commitments will need to be fleshed out in more detail during the industry engagement process. There will, of course, be discussions about how the funds are best allocated and how much, if any, public money will be required.

While the designated £500m is smaller in amount than what had been proposed by the taskforce - which pledged to raise £5bn by 2024 - the capital will be targeted across the science and tech sectors and could be increased depending on the scheme’s success. The ambitious timescale reflects the need for capital in these areas as any plans to create new funds in this space will take time. Such funds could be transformational in helping scale companies in areas where the UK has great strengths, such as biotech and deeptech. The BVCA will be engaging with key stakeholders, most notably the BBB, HM Treasury and BEIS, to ensure that the scheme works best for our members, who have the skills to ensure the funding provided is put to best use.

 

Chris Elphick
VC Policy Manager, BVCA


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