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From Survive to Thrive – Funding the Growth Economy to Kickstart

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From Survive to Thrive – Funding the Growth Economy to Kickstart Sir Anthony Seldon & Stephen Welton From survive to thrive Funding the growth economy to kickstart an investment-led recovery Vinson Centre for Economics and Entrepreneurship, University of Buckingham, in partnership with BGF 2 3 CONTENTS 04 Executive summary 06 Authors and interviewees 10 Preface: Andy Haldane, Industrial Strategy Council 11 Preface: Alison Rose, NatWest Group 12 Introduction: Stephen Welton, BGF 14 Introduction: Sir Anthony Seldon, University of Buckingham 16 PwC research: What is the growth economy? 18 Chapter 1: The challenge – Sir Anthony Seldon 28 Chapter 2: Why it’s urgent – Stephen Welton 38 Chapter 3: The solutions – Sir Anthony Seldon 46 Conclusion – Sir Anthony Seldon 2. 4 5 what’s needed: FIVE PILLARS FOR How it will work The fund must be: GROWTH • Local. To achieve ‘levelling executive up’, funding must be dispersed across the four nations of the Sir Anthony Seldon, alongside BGF, proposes UK by a regional network of a UK National Renewal Fund of £15 billion from investment specialists. This these sources: cannot be a bailout for the City summary of London, it should be for the • £3 billion invested using a quoted vehicle or people, by the people, for the vehicles to channel private investors’ money, sake and benefit of the nation. through the stock market, to the growth economy. • Patient. The fund must take An investment trust or other closed-ended a long-term approach to fuel investment vehicle may be appropriate. growth for decades to come, • £3 billion from the growth funds of Defined maximising the dynamism of Benefit (DB) pension schemes run by the UK’s Now is the time to act the economy. largest companies. The government can convene • Commercial. This is not a • Coronavirus has crushed confidence. the major schemes and make the case for them to The context handout, nor is it an emergency A choking of liquidity risks a failed generation take part in this national effort. measure to protect employment. • Growing twice as fast as GDP, the roughly of growth economy companies. We must • £3 billion from Defined Contribution (DC) The participants and the 21,400 small and medium-sized businesses that act now to avoid economic catastrophe. pension schemes. To open up this crucial source investments allocated will be make up the ‘growth economy’ are at the heart of • It is the job of private actors to drive capital of funding, we propose a much-needed and urgent arranged solely on commercial the UK’s dynamism, creativity and prosperity.1 where it needs to go, but the state must step up change to the charge cap situation. terms. In the long term, this • Yet there is a persistent shortfall in equity funding this winter to help to crowd that capital in by • £3 billion from large private sector investors will create jobs by ensuring for the growth economy, identified at least 90 convening, liberalising, incentivising and co- such as the insurance industry and other actors our economy is dynamic and years ago. This ‘growth economy gap’ is made investing when appropriate. as well as leading global sovereign wealth funds, vibrant. worse by the UK’s regional disparities. • The ambition to close the equity funding gap encouraged to support an investment-led recovery. • Widespread. By building on • The gap arises owing to a shortage of appropriate is in line with stated government objectives – • £3 billion from government in the form of an what already exists across the funding options, artificial barriers to access, particularly to ‘level up’ the economy by tackling initiative that essentially extends the Future Fund country and encouraging others and a poor level of awareness of the benefits regional disparities across the four nations of and turns it into a long-term agent of change. to do more, the infrastructure of long-term, patient, equity capital. the UK, but also to increase the national focus is already in place to make an • Although the shortfall is nothing new, it gets on R&D and to give pension holders greater immediate impact. wider and more damaging in times of crisis, control over their assets, thus promoting a form of £15 billion uk national renewal fund and there is a risk the Covid-19 pandemic will shareholder capitalism in a similar fashion to the turn the gap into a chasm. way homeownership was extended in the eighties. • A widening of the gap could be disastrous – • Government has already made a significant down not just for thousands of exciting, innovative payment on an investment-led recovery with the £3bn £3bn £3bn £3bn £3bn small and medium-sized businesses, but also for Future Fund. Now is the time to move from merely the local areas where they provide growth and surviving to thriving, by giving growth economy employment, and the future flexibility and companies the rocket fuel they need to flourish. strength of the wider UK economy. • It’s time to seriously back the growth economy by kickstarting an investment-led recovery. Quoted Defined Defined Private sector Government investment Benefit pension Contribution actors and extension of vehicle(s) schemes pension sovereign Future Fund 1 According to exclusive research carried out by PwC in partnership with BGF, see pages 16-17. schemes wealth funds 6 7 authors interviewees Lord Karan Bilimoria Sir Damon Buffini Lucy Armstrong President of the Chair, Patient Capital Review Chief executive, The Confederation of British and founding partner, Alchemists Industry, entrepreneur Permira Catherine Clarke John Fingleton Independent governor, De Sherry Coutu Economist and former Montfort University and Entrepreneur and investor chief executive of the Office former general counsel, BGF of Fair Trading Sir Anthony Seldon Stephen Welton Outgoing vice-chancellor, Executive chairman, BGF University of Buckingham Sir Douglas Flint Robert Gardner Irene Graham Chairman, Standard Life Investment director at Chief executive, Aberdeen and former group St James’s Place Wealth ScaleUp Institute chairman of HSBC Holdings Management Sir Anthony Seldon is a leading contemporary historian, Stephen Welton has an extensive investment background, educationalist, commentator and political author. His and in July 2020 became the executive chairman of five-year term as vice-chancellor of the University of BGF, stepping up from his prior role as founding chief Buckingham ended in October 2020. He was Master of executive, beginning in 2011. Stephen was previously Wellington College, one of Britain’s leading independent one of the founding partners of the global private equity Andy Haldane Rupert Harrison schools, until 2015. He is author or editor of over 40 firm CCMP Capital (formerly JP Morgan Partners) Dame Teresa Graham Chair of the Industrial Portfolio manager at Chair of the SME Advisory Strategy Council and chief BlackRock and former books on contemporary history, politics and education, and the managing director of Barclays Private Equity. Group for UK Finance economist at the Bank of chair of the UK Council England of Economic Advisers was the co-founder and first director of the Centre for In 2013, Stephen was appointed an adviser to the UK Contemporary British History, is co-founder of Action Government regarding the establishment of the British for Happiness, and is honorary historical adviser to 10 Business Bank and, in 2017, he served as a member Downing Street. His many other activities include being of the Industry Panel advising the Treasury on the on the First World War Centenary Culture Committee, Patient Capital Review. He joined the board of FTSE Paul Johnson which was established by the Culture Secretary in 2013, 100 alternative asset manager ICG as a non-executive Ian Hogarth Peter Jones CBE Economist and director Entrepreneur, co-founder of Entrepreneur and of the Institute for Fiscal and serving as a governor of The Royal Shakespeare director in 2017 and in 2018 was appointed a member Songkick and angel investor philanthropist Company. of the first council of Innovate UK. Stephen started Studies his career in banking, has a law degree from Durham University and is a qualified barrister-at-law. 8 9 Vinson Centre for Economics and Entrepreneurship Professor Matthias Klaes Economist, inaugural interviewees director of Vinson Centre Established in 2018 by the University for Economics and of Buckingham, in partnership with Entrepreneurship the Institute of Economics Affairs, the Vinson Centre for Economics and Entrepreneurship is home to the university’s economics course. It is also used by Lord Jim O’Neill Diana Noble research fellows, and for conferences and Economist, former Lord David Prior Former non-executive chairman Goldman Sachs internships. The centre is housed in the director, BGF, and member Asset Management and Chairman of NHS England of court, Bank of England commercial secretary to Vinson Building, which was built using a the Treasury donation from entrepreneur Lord Vinson. The University of Buckingham was the UK’s first independent university when it was set up in 1976. Professor Dame Nancy Rothwell Peter Read Alison Rose President and vice-chancellor Cortex partner, Vitruvian Group chief executive officer, of the University of Partners NatWest Group BGF Manchester and chair of The Russell Group Set up in 2011, BGF is an investment partner for growing companies in every sector of the economy in the UK and Ireland. With over 170 staff in 16 offices Sir Nigel Rudd Richard Seebohm Rohan Silva Advisor to BGF and around the UK and Ireland, BGF provides Civil servant, amateur Chief executive and founder former chairman, founder economic historian and son Second Home, and senior of Williams Plc, chairman local expertise to exciting entrepreneurs and of Frederic Seebohm, former policy adviser to David of Boots The Chemist and chair of ICFC small businesses. BGF has invested £2.5 Cameron chairman of Heathrow billion since 2011 in nearly 350 companies, three-quarters of which are based outside London, making it the most active growth investor in the world.
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