A prominent private capital trade body has voiced alarm regarding the pace at which financial institutions are honouring their commitments made under the Mansion House compact. UK Private Capital, previously known as the British Venture Capital Association, has called for greater urgency from signatories to increase their allocations into venture capital and growth equity, expressing concern over 'slow and unclear' progress.
The Mansion House compact, launched by the Chancellor of the Exchequer, Jeremy Hunt, aimed to encourage pension funds and other institutional investors to commit more capital to high-growth, innovative UK companies. The initiative sought to unlock significant investment for the country's burgeoning tech and life sciences sectors, fostering economic growth and creating jobs.
According to UK Private Capital, the lack of swift action from those who signed up to the compact is hindering its potential impact. The trade body is advocating for signatories to accelerate their investment strategies, ensuring that the pledged capital is deployed effectively into productive UK assets. This push comes amidst a broader government drive to channel more domestic institutional investment into the UK economy.
The original compact saw several major pension funds and insurers pledge to increase their allocations to unlisted equities, with an ambition to allocate 5% of their default Defined Contribution (DC) pension assets to private markets by 2030. This collective commitment was projected to unlock billions of pounds for high-growth businesses. However, the latest intervention from UK Private Capital suggests that the implementation of these pledges is not proceeding as rapidly as hoped.
The implications of this slow progress could be significant for the UK's innovation economy. Venture capital is crucial for funding start-ups and scale-ups, enabling them to develop new technologies, create employment, and compete on a global stage. A delay in promised investment could mean these businesses struggle to secure the necessary funding, potentially slowing down economic diversification and growth.
The trade body's call for government intervention highlights a potential need for stronger mechanisms to ensure accountability and accelerate the deployment of capital. This could involve further dialogue with signatories or exploring policy levers to encourage faster action, aligning with the government's wider agenda to boost UK competitiveness and productivity.
Source: UK Private Capital