British Finance Minister Jeremy Hunt unveiled a plan to strengthen the country’s tech startup ecosystem by utilizing the pension fund to provide funding, with the goal of strengthening the United Kingdom‘s standing as a major player in the global tech landscape.
To counter the slowdown in startup activity within the UK, Hunt planned an investment strategy. By 2030, up to €59 billion from pension funds, including defined contributions (DC), will be redirected towards unlisted equities. The UK, possessing the largest pension market in Europe, has €3 trillion in pension funds. Hunt’s proposal allocates 5% of the money in default funds to support new startups, giving them extra funds to grow and succeed.
Hunt called the current scenario “perverse,” stating that UK institutional investors lag behind their international counterparts in backing high-growth domestic companies. A study by Ledgy, a valuation tracking platform, revealed that UK-based tech startups offer substantial employee equity to navigate the investment landscape-one in four UK founders gives 15% or less of total equity to employees.
The British Finance Minister emphasized that this plan could release an extra €88 billion for growth by 2030, as he stated, “finally addressing the shortage of scale-up capital holding back so many of our most promising companies.”
Between 1997 and 2019, the UK witnessed a 44% decline in domestically listed companies on its stock exchange. However, the country now aims to transform into the destination of choice for the world’s fastest-growing companies.
“We aspire to become the world’s next Silicon Valley and a scientific powerhouse. By harnessing technologies like AI, we intend to synergize the talents of financiers, entrepreneurs, and scientists, positioning our nation as a positive global force,” said Hunt.
Praise from UK-based start-ups
Hunt’s choice to use pension funds for backing startups has earned praise from UK-based firms such as Robin AI and ACF Investors. In a recent media interview, Robin AI CEO Richard Robinson remarked, “If up to £50bn is unlocked by 2030 as the government promises, our homegrown founders will get the fuel they need to build world-beating companies.”
Till Mills, Managing Partner of ACF Investors, perceives the Chancellor’s announcement as a recognition of the important role played by fast-growing tech firms in the UK’s economic vitality.