A number of solutions have been evaluated across the market failures – see grid below – and these have been assessed across four classifications of: 

  • Accelerate the pillars that already exist
  • Expand to meet the key challenges
  • Realign in response to the changing opportunities post-Covid-19
  • Create new long-term infrastructure to drive growth

Overall those varying solutions and levels theme into 5 key actions which will materially affect the structural and cyclical growth gap: 


Five key actions will materially affect the structural and cyclical growth gap.


Create a ‘National Blueprint for Growth’ that delivers a strategic joined up approach to support and champion more consistent and effective growth across all regions and sectors of the economy. Using a strategic, tailored and segmented approach to scaling businesses that addresses the UK’s systemic issues around scaling up across talent, markets and infrastructure, develop a core long term growth capital strategy to tackle regulatory, legal and structural impediments and identify related short-term tactical opportunities.

The UK’s lies 13th in the world for ‘scaleups’ and when compared to our international counterparts that lay ahead of us, including France, Germany, US and Canada, it is clear that common features they share are: a more federated ‘regionalised’ governance model; long term ‘arms length’ national agencies driving their finance, innovation and business support interventions; deeper pools of capital drawn from the institutional private sector, across varying asset classes, including in a number a Sovereign Wealth Fund. 

As we head further into a new decade, which has brought with it an unprecedented global pandemic, and seek to recover and build back better, the UK must definitively tackle the long term structural deficiencies in scaleup growth and the key impediments to it which include access to long term patient capital.

A new National Blueprint for Growth should have 3 key underpinning elements: 

i. High Growth Segmentation: developing and embedding a joined up strategy across business growth life cycles with tailored solutions across national and local government. This should place scaling business, new and established, across sectors, at its core. It should break down silos and departmental barriers to ensure there is a clear cross government scaleup strategy with dedicated resources and relationship management structures at local and national level to back delivery to address:

  • Scaleup talent needs across sectors and geographies, including fast track visas 
  • Scaleup market needs: procurement, collaboration exports and internationalisation to include: opportunities to expand dedicated trade missions for scaleups across the UK and dedicated cross government scaleup procurement channels 
  • Scaleup finance and infrastructure requirements (including local space to scale and grow) 

ii. Realignment of the regulatory and policy environment towards growth by reassessing the legislative and regulatory impediments to growth removing barriers and championing innovation, in particular addressing the long term impediments to Growth Capital. This realignment should focus on:

  • Driving up the R&D opportunities by taking a bolder approach to the Frascati Manual and assessing the R&D tax credits to encompass all sectors. This could include a temporary bringing forward of R&D tax credits as we kick start the recovery
  • An enhanced AIA for scaling firms to support capital investment
  • Broadening of Sandbox opportunities across regulated sectors
  • Growth Boards established at regional level to drive forward local initiatives
  • Reassessing State Aid rules and UK legislation hindering growth opportunities and growth capital flows – see Recommendation 2 below.

iii. Open Data: 

The power of data to better understand and boost economic growth is significant. Understanding our economic health demands frequent taking readings at many levels with existing and new data, and better ways of combining it.  Harnessing public and private sector data is key as we seek to refine and target initiatives and engagement towards scaling businesses in a timely and effective manner. Government should make sure that legislation supports data sharing across departments and localities, including that held by HMRC that has the most up to date data points. Open data sources such as Open Banking should be leveraged along with APIs and the continuation of the Government DECA project. Better use of data held will support the levelling up agenda, makes the ecosystem more efficient in their assessments and solutions and enable prioritisation of those areas of the country where the scaleup gap is increasing as well as target bespoke engagement with our scaleup high potential growth firms.


Through changes in legislation and organisation that crowds in the existing significant private sector capital that can make inroads into closing the Growth Gap. This should entail developing an aggregator structure with relevant back office analytical and distribution capability. Such a structure could be pursued by transforming British Patient Capital (BPC) into a joint-venture vehicle with the private Sector. The Government would deploy further seed capital as necessary. Their role in this is to convene and catalyse, with the private sector crowding in around it. 

Institutional entities such as pension funds, insurance companies and corporate entities are key to closing the Growth Capital Gap and their resource pools must be unlocked in order to do so.

The annual flow gap of £15bn identified in this report is equivalent to only a fraction of a per cent of total UK pension fund assets under management. With the right structures in place this is well within the grasp of the UK private sector to close with relevant regulatory support and impetus from Government which needs to double down and accelerate key measures underway and drive forward heightened collaboration with the private sector.

The Patient Capital Review (PCR) clearly laid out the analysis of the issues surrounding release of such capital pools and it also laid down a pathway of action to begin to tackle this which remain even more valid today.

The key now is to significantly dial up at scale the progression of these initiatives as well as deal with the regulatory impediments including revisiting Solvency II. 

As reflected below there has been action taken on the majority of the PCR recommendations e.g establishing British Patient Capital (BPC), re-focusing EIS and VCTs on knowledge intensive firms and implementing a regional Angel programme through the British Business Bank.

However, most initiatives are only part way to being fulfilled and currently sub-scale to meet the full structural challenges in play – yet alone the now significant Covid-19 cyclical challenge. 

For example, the £2.5bn British Patient Capital programme, and the additional £5bn it is looking to unlock from the private sector, is in year two of a 10 year investment programme, with so far only £334m in new BPC funded commitments in 2018/19. On a regional level, the £100m Regional Angel Programme that was announced as part of the same package of measures is at an early stage of deployment and has only deployed 30% of the funds in the first 2 years. VCTs are still hampered by rules that limit their follow on funding ability with existing portfolio companies which necessarily impedes the ability for businesses to scale with their existing investor base.

Blockers also remain to fully unlock institutional investment, particularly from Pension Funds. Whilst some changes have been made following recommendations by the Pensions Taskforce, further progress still needs to be made on both the technical assessment of changes to fee structures, as recommended in the DC Pensions review which reported in September 2019, and to develop better vehicle that enable the industry to access high growth business asset class.

The current acute challenges created by covid-19 mean it is even more important to take bold action to address both the structural and cyclical challenges that the UK economy faces. With the gap now doubling, a heightened impetus and focus is required to allow the UK economy to move forward to recovery. 

The Government needs to rapidly accelerate the delivery of the suite of PCR initiatives with injection of both further seed capital as well as impetus to deliver the required regulatory changes. 

To catalyse action, Government should in the forthcoming CSR invest further through the BPC structure and at the same time seek to accelerate its partnership (move towards) with the private sector by forming a much more structured relationship between the BPC and the private sector, in a more formal Joint Venture type arrangement with private sector institutional and scalable funds, where it can leverage both institutional monies, analytical and distribution power.  Lessons can be drawn from the Canadian models on such an arrangement which fosters collaboration and cooperation, please cross reference with page 38, Canadian Pension Schemes. 

Such a Joint Venture arrangement would provide the aggregator structure desired by the institutional players at the same time as delivering at scale regional funds with more ready access to investor pools. There are a range of UK private sector Funds that could be harnessed to form part of the Venture such as Foresight, BGF, Mercia, Minerva etc. Leveraging also the structures that have evolved through e.g. NPIF/Midlands/Wdb/SNIB and that require evolution in other regions. From an institutional standpoint the BPC with such a formation would provide the aggregator vehicle desired by institutional players and at scale distribution. Whilst regulatory measures can be developed to encourage investment through such a vehicle in parallel relevant co investment and guarantee structures should be deployed to support institutional and corporate engagement with BPC. This should include the immediate progression of the Small Business Investment Company model identified in the PCR.

Collaboration will be key going forward. Fully implementing the PCR at pace is essential. We have the ingredients – they need to come together, be fully implemented and be supported by regulatory channels.

The Government has a role to catalyse that collaboration and the private sector a role now to step up and work together across finance players to address the significant issues growth capital issues Covid-19 has exacerbated if we are to harness our entrepreneurial strengths and scaleup films for the next generation. 

3. Expand and build upon the British Business Bank (BBB) and our Devolved Nation Development entities

Expand and build upon the British Business Bank (BBB) by creating greater regional presence, with regional decision making, of the BBB deployed under a national framework and continue the developments with Scottish Investment Bank, Development Bank of Wales and Invest NI. Develop, through this presence, empowered regional and devolved hubs with the ability to be agile and deploy funding to sectors and opportunities at speed, through both national and bespoke, regionally designed schemes.  Increase the BBB and devolved development entities capacity and runway to respond to the economic changes Covid-19 and the exit from the EU bring. Expand existing programmes and develop new ones as economic and sector needs evolve. 

Regional Presence – learning from others

The intent of this model is to combine local knowledge and insights with the British Business Bank’s expertise to deliver local solutions at a commercially viable scale – as scale will be vital for success. 

Taking learnings from international players, the BBB’s role as a National Development Bank should retain an arm’s length relationship with Government, allowing it to focus on day to day operations and allocating resources where it sees market needs, while working to a clear and defined set of long-term objectives that are agreed with government, with devolved entities operating on the same basis.

The BBB would continue to act primarily as a wholesale funder and ecosystem developer.

Similar to the private sector, alongside the existing National HQ, going forward the BBB would strengthen its network presence in regions which could include the set up of formal regional offices. These could have ring fenced resources operating to defined parameters and budgets set at BBB national level. An enhanced regional presence would bring it closer to the market place, and to the end customer and will enable it to respond more rapidly to emerging regional needs and themes. Such presence would also reduce the friction of local investors’ ability to access schemes in a timely manner with these BBB regional centres/hubs, similar to the private sector, holding delegated authority to approve investors fitting the criteria set for participating in schemes set at national level. This enhanced regional network could also be allocated a portion of funding as a Local Opportunity Budget for use on new local initiatives pertinent to the region and matching pertinent criteria set at the outset.  BBB regional offices could be firstly established in significant regional clusters whilst at the same time, exploration of technological solutions to increase local reach should be made. Relevant learnings from the Future Fund should be leveraged.

Expansion / Acceleration of existing products

In addition to this expanded local presence with delegated powers, the BBB should assess the suite of products now in its armoury and seek to scale up, accelerate and expand those with proven results. This would include expanding the Angel Co-Fund; accelerating deployment of the Regional Angel programme, expand the ECF programme and expansion of the activity of Regional Investment Funds both to extend runways of existing mechanisms such as the Northern Powerhouse Investment Fund, Midland Engine Investment Fund and expand into areas not yet covered, e.g. West of England/South West. It should also assess models working elsewhere and adopt them where proven and relevant including the Scottish Angel Co-investment Fund model to widen access to co-investment opportunities.

In particular the capacity for UK Venture Debt should be fostered working with the private sector. In this regard, HMT should work with BBB to build on the success of the Future Fund to expand its life span and reach. 

Tackling Information Asymmetries and Diversity

A key role for an enhanced BBB regional presence would be to develop ecosystem cohesion through outreach activities with the investor, bank, advisory and business communities, building on the current role of the BBB UK network team. This will also aid in addressing the information asymmetries through structured education activities; investor briefings and intelligence gathering. It should also facilitate a stronger cluster effect, which is beneficial to local growth, and be a driver of connectivity between regions and national private sector players.

The offices should also have a specific Diversity objective and role to work with Diverse community leaders in extending the reach of finance to women and EMB entrepreneurs. 

The BBB Finance Hub should be expanded to include greater levels of localised information, and potentially play a role in an equity referral mechanism working with the private sector, such as the ELITE platform (see International Learnings).

In time the BBB and devolved nations development entities could also be a means through which to deliver the Shared Prosperity Fund at a local level.  There is also a potential case for UKEF to align into the BBB and Devolved entities as in other markets, such as Germany, where export services sit under KfW.


Expand the role and scale of Innovate UK and its direct deployment of innovation & R&D investment capital (via grants and loans through their Investor Partnership Model), to our most innovative, early stage and scaling businesses. Expand Innovate UK’s (IUK) high growth regional relationship management infrastructure and global innovation network, along with the critical partnership opportunities it brings to our scaleups in collaborating with Government, corporates and Universities. This should include expansion of the role and use of SBRI including its ability to drive procurement with scaling firms and Government as an anchor ‘first’ client, strengthening the Catapult Centres to support regional clusters and further drive forward R&D investment via Test beds and technology focused competitions.

Innovative businesses are a key part of growing the UK economy.  Innovate UK has an important role to play in driving this agenda and ensuring more innovative UK businesses go on to grow and scale in the UK and globally. 

However, there are a number of challenges which must be addressed to ensure a strong recovery and future economy which enables the UK to compete with other countries. Firstly, the need to increase the level of R&D investment from the public and private sectors – the Government’s intention to increase public investment in R&D to £22bn per year by 2024/25 is an important statement of intent. It is also essential that the UK takes steps to maximise the opportunity to have a recovery that supports green growth.  Furthermore, in order to support our innovative, scaling businesses to grow globally we need to maintain access to, and develop new links with, programmes in Europe and beyond that enable international collaboration and supply chain access, for example Horizon Europe. 

To be seen as a global leader in innovation, the UK has to develop unique capabilities and facilities that are world leading and therefore an attractor of global research talent and businesses to come to the UK. It is important to anchor these in a strong and effective innovation agency. Building on what works and taking action to strengthen Innovate UK’s ability to deliver tailored support, programmes and funding to businesses that maximises their growth is vital. Increased partnership with the private sector is also important, both for leveraging private investment, but also to maximise the knowledge and expertise that exists and bringing them together for the benefit of the business. 

A range of key opportunities emerge for Innovate UK to expand its remit to boost growth: these include:

A broader interpretation of the Frascati Manual: As we move forward with the R&D roadmap, as laid out in the Government’s recent publication, we should take the opportunity, as part of a National Blueprint for Growth as outlined in recommendation 1,  to reassess the manner in which we are implementing the Frascati Manual to ensure it optimises growth and R&D opportunities.

Funding and finance – extending the investor Partnership Programme – Innovate UK funding is often seen by the investor community as a “quality badge” and helps crowd in private finance where R&D is deemed too risky or early stage for private investment alone.  To ensure more private investment is crowded in, Innovate UK’s Investor Partnerships model could be expanded, offering a package of public sector grant funding and private equity investment to support early stage R&D and accelerate the process of commercialisation.  Evidence shows that businesses that secure both grants and equity tend to raise more money and achieve higher valuations than their counterparts who secured either grants or equity.  As at July 2020, £25.8m in grant funding has been committed to 121 SMEs alongside £68m in aligned equity investment from 21 investor partners. 37 projects have completed.  Over £118m in follow-on investment has been raised by SMEs involved in these programmes (excluding one outlier raising a further £67m).

Innovate UK’s wider portfolio of grants, loans and SBRI procurement contracts is also vital for many businesses and the level of funding needs to be increased as well encouraging greater use of SBRI by other Government Departments and public bodies.

Testbeds – Large scale testbeds should be funded in areas to enhance the internationally recognised local strengths to raise the profile of R&D and innovation and drive forward UK industry and new sectors of the economy; level up regional economies; attract inward investment and talent and drive the scaleups of tomorrow.

Catapult centres – there is the potential to strengthen the existing network of Catapult centres and create new centres in areas where the UK has the potential to take a global lead and to support UK industry to do so.  Given the centres are located in different parts of the UK there is also the opportunity create more of a ‘cluster’ effect around them and collaborative opportunities as a route to anchor clients in the public and private sector.

ScaleUp Network – It is important to build on the success of the existing Enterprise Europe Network and create a new network focused on innovation and global growth to support innovative high growth and scaling businesses in the UK. Currently the network supports over 3,000 businesses each year, bringing together a coherent package of support including 250 Innovation and Growth Advisers across England, Northern Ireland and Wales (with Scottish Enterprise covering Scotland). A Scaleup programme using a novel delivery model provides high end intensive support to a select group of c.40 companies with the highest growth potential each year. This should continue to be enhanced and developed including its peer to peer activity.


A dedicated Future Opportunity Fund should be developed to allow the UK to effectively engage with emerging sectors and industries such as the carbon net-zero challenge as well as drive forward on wider sustainable goals.

This would be ‘purpose driven’ and have the right risk appetite to seed and catalyse long term UK economic growth from nascent and developing sectors, and opportunities which are yet to emerge. 

This Fund would be designed to work actively with the overarching growth blueprint set out in Recommendation 1, and the broader enhancements described in wider recommendations. 

It could sit as part of a number of existing bodies such as Innovate UK and the British Business Bank. International models often have such a ‘mission led’ under the wing of the Innovation Agency or National Development Bank. Alternatively, it could be standalone and operate as an entity with the dual role of not only supporting domestic companies but international opportunities similar to a Sovereign Investment Fund. This would allow it to have both a domestic and international role taking significant positions in sectors addressing global challenges. 

To be effective, this Fund must also be flexible enough to account for the evolving nature of these future opportunities and actively work to engage with the data to find them.

Innovative and new industries have significant risk profiles and can be challenging for investors to engage with, even when the development of such industries will have long term material benefits for the UK and global economy as a whole.

Building upon previous examples the purpose driven nature of such a Fund will be key in enabling wider investment to industries of fundamental significance, and in line with UK economy wide goals of job creation, levelling up and local economic growth. 

The Future Opportunity Fund would represent an active tool that takes measured and recognised risks, as well as facilitating the mobilisation of private sector capital into key emerging global industries that are of strategic importance to the UK.