I am very pleased to read of this from two friends – Will Hutton and Nick Lyons
Congratulations to the team at British Growth Partnership and BBB. But it is also a reminder that supply of long term patient capital still lags hugely the demand from great British businesses who remain dependent on overseas capital for so much of their accelerator capital.The Mansion House Compact was a powerful and important statement of intent by 11 pension managers representing two thirds of the DC market. But implementation has been frustratingly slow. We must move further and faster and find vehicles through which to enable this capital to flow to the best returns.
British Growth Partnership and Future Growth Capital, a jv between Schroders and Standard Life (declaration of interest: I chair SL) are two that have set out their stall but we need to have a clear roadmap about how others will deploy too. And we really need to accelerate…….
While we have been admiring the problem, the European Investment Fund has launched a €15 billion fund of funds to back growth stage companies including an ambitious European Tech Champions Initiative. This looks remarkably similar to the Future Growth Fund I proposed as Lord Mayor which I couldn’t get the MHC signatories to support and about which I was extensively quizzed by European ambassadors 🤔
Don’t get me wrong, I support all European tech and life science growth companies getting access to local funding and European pensioners having a chance to participate in those returns…….but this looks remarkably like someone eating our lunch. Otherwise we are just going to carry on watching great British companies make the inevitable choice: that they must follow the money and, in doing so, enrich the pensioners of North America and Australia.
Paul Hume , a retired civil servant had this to say. I agree with him as much as I’m sure Hutton and Lyons will.
It’s striking that as a collective, these vehicles still only control around £9bn — a tiny fraction of what’s needed if we’re serious about building a domestic growth engine. But there’s a deeper issue here. If we want long‑term, compounding returns, the most reliable investment the UK could make is reducing deprivation.
You can read a report on BBB’s position here
Will Hutton
Nick Lyons
Blinkers off please
The obvious partner
Since their inception, the Enterprise Investment Scheme (EIS) (1994) and the Seed Enterprise Investment Scheme (SEIS) (2012) have become cornerstones of the UK’s venture capital ecosystem. As of 2026, these schemes have successfully funneled over £34 billion into more than 59,000 high-growth British businesses. While the EIS accounts for the vast majority of this capital, recent expansions to SEIS limits—allowing companies to raise up to £250,000—have sparked a significant surge in seed-stage funding.
The Pension Fund Opportunity
A pivotal shift is occurring as these “tax-alleviated” startups mature. Historically, individual investors faced a “funding gap” once companies outgrew EIS eligibility or reached the 5-year post-profit phase.
Under the Mansion House Compact, UK pension funds are now being incentivized to bridge this gap.
This creates a strategic synergy:
* Late-Stage Scaling: Pension funds can now target mature, de-risked companies that have successfully utilized SEIS/EIS to reach profitability.
* The “5-Year” Window: At this stage, companies often require larger “Series B” or “Series C” rounds (£20m+) to scale globally—amounts typically too large for individual EIS investors but ideal for institutional “patient capital.”
* Economic Impact: By allocating up to 5% of default funds to these private assets, pension schemes gain access to high-growth returns while providing the exit liquidity or follow-on capital necessary for the UK’s next generation of “unicorns.”
I need to declare an interest with the British computer chip which can save a Server farm 20% electricity costs whilst improving latency and speed of light computing.
It would be good not to accept US investment in the next round
While I agree with John Mather’s sentiments and values invested, there is another view, as follows:
Investment in EIS (Enterprise Investment Scheme) and SEIS (Seed Enterprise Investment Scheme) involves high risk, with failure rates typically reflecting the challenges faced by early-stage companies, where around 60% of startups fail within their first three years.
SEIS investments, targeting very early-stage companies, are generally riskier than EIS, which target slightly more established firms.
Data indicates that less than 40% of startups are still trading after five years.
In a sample of a leading SEIS fund manager’s 2017 portfolio, however, only two out of ten (20%) SEIS companies failed and were written down to zero within five years.
HMRC data shows that losses claimed against income in relation to EIS/SEIS investments increased from £207m in 2020/21 to £303m in 2022/23, indicating a rising number of failures or write-downs.
Based on provisional HMRC statistics released in May 2025, in the tax year 2023 to 2024 there was a further increase in loss relief claims for failed EIS/SEIS investments.
Companies registered in London and the South East account for around two-thirds of all EIS/SEIS investment. Just over a quarter of the UK population lives in London and the South East.
Thank you Derek, in my wealth management practice we were lucky to support 2 companies under the Business Expansion scheme one sold to a quoted company and the other went into liquidation showing a small profit net of tax from the final distribution.
When EIS and SEIS came along we supported 6 others A computer games company did well turning £6000 into just over £1,000,000 in 5years 2 failed
Another games company quadrupled the gross subscription three are still trading the chip manufacturer using a light switching patented design has had approaches to be sold but EIS would be lost and a seven figure grant has recently been received to take the technology to the next stage. This has all the characteristics of a world class company. The remaining two are making good progress .
I have on my desk a business plan for a “dark factory” The majority of the staff will be the highly skilled robot engineers. This week I was asked to join a project to build a Raquetes Club early days and much to learn of the economics of Tennis, Pickleball and Paddle.
I am a little skeptical about the involvement in catering as one of the failures was a Cotswold pub although obtaining planning to add bedrooms on part of the car park enabled a sale which after accounting for the initial tax relief and the loss relief avoided a net loss.
Maybe we were lucky. There are better professionals in this sector such as Par Equity and there are some I know to avoid.
Agewage was EIS but I only subscribed and could not claim it in the list.
In case anyone doubts my message pension funds should work with the investment void BEYOND EIS. Deep Mind could have stayed in the U.K. but Google saw the opportunity.