Annual Report and Accounts 2020 Supporting smaller businesses across the UK british-business-bank.co.uk Contents Annual Report and Accounts 2020 We make finance markets work better so smaller businesses across the UK can prosper and grow. Contents Chair’s statement 2 Chief Executive’s statement 4 Outgoing Chief Executive’s statement 6 Strategic report 8 Directors’ report 60 Directors’ remuneration report 90 Directors’ responsibilities 106 Independent auditor’s report 107 Consolidated financial statements 118 Notes to the consolidated financial statements 122 Independent auditor’s report 177 Company financial statements 180 Notes to the Company financial statements 183 British Business Bank british-business-bank.co.uk 1 Chair’s statement Annual Report and Accounts 2020 Chair’s statement Responding to the Covid-19 pandemic Adapting to In mid-March 2020, the economic shock to the UK economy caused by the outbreak of Covid-19 saw the British Business Bank become deliver more a key element of the government’s response to the crisis, including expanding our remit to support for smaller larger companies in certain circumstances. Our people responded swiftly, and with businesses great agility, to address this unprecedented situation, and the Board is truly appreciative of their The British Business Bank’s mission has dedication and hard work under always been to make finance markets pressure in delivering many billions of pounds of vital emergency loans work better so that smaller businesses to UK businesses. across the UK can prosper and grow. Our market-focused objectives – increasing volume and diversity of finance, responding to regional For the majority of 2019/20, we imbalances, and encouraging and continued to build our programmes enabling smaller businesses to seek of support for smaller businesses the finance best suited to their across the UK, growing as an needs – remain the same, even organisation and putting in place though the emphasis within each appropriate infrastructure as we changed as Covid-19 accelerated. did so. Because this report is Our focus on smaller businesses retrospective in nature, covering – of great importance to the UK the 2019/20 financial year, it does economy – continued, and we not cover in detail our full response increased substantially our volume to the Covid-19 crisis. We have, of finance supported while adding however, included an outline of our a greater diversity of provider to work during the first few months of our portfolio. 2020/21, to provide some context around what has proved to be one of the most significant events for the country in recent times. “ The Board is truly appreciative of the team’s dedication and hard work under pressure in delivering many billions of pounds of vital emergency loans to UK businesses.” 2 British Business Bank british-business-bank.co.uk Chair’s statement Annual Report and Accounts 2020 I was delighted when Catherine The Board Lewis La Torre, the CEO of our Our future role Keith Morgan, the Bank’s Chief commercial arm, agreed to take up We expect the British Business Executive Officer, announced in the position of CEO of the British Bank to play an increasingly October 2019 that he would be Business Bank from 1 September important role as we emerge from stepping down in late 2020. Keith 2020. Catherine has achieved the Covid-19 pandemic, flexing our first became involved in setting great success as CEO of our two resources to help UK businesses up the Bank in 2013, and has been growth-focused and commercially re-establish themselves over the pivotal in making it the success it successful subsidiaries, and I look coming months. has become over the intervening forward to working with her as we years – a fact recognised by the drive forward our support for There may well be additional award of a CBE for services to businesses during a period of UK responsibilities, and changes Small Business Finance in the economic recovery. to our role, as we work with the Queen’s New Year Honours list government to map out the next I would also like to thank Christina 2020. I would like to thank Keith phase of the Bank’s development. McComb, who stepped down as for his exemplary leadership of We stand ready, willing and able to Senior Independent Director this the organisation. do what is needed to help address year, for her valuable service and whatever challenges lie ahead. contribution over the last five years. We appointed Neeta Atkar as her successor in November 2019, and Nathaniel Sloane as a new Non-executive Director in Lord Smith of Kelvin March 2020. Chair British Business Bank british-business-bank.co.uk 3 Chief Executive’s statement Annual Report and Accounts 2020 Chief Executive’s statement Recovering through growth As the UK economy shifts its focus Responding from stabilisation to recovery, we need to ensure smaller businesses can manage the many new with agility, challenges they face. It is growth that will ultimately be the key to a thriving post-Covid-19 delivering at UK economy. The British Business Bank is integral to supporting government pace and scale in leading Britain’s recovery and its ambition to make the UK the best place in the world to start and The British Business Bank is an organisation grow a business. that has innovation, adaptability and an Now is the time for us to build on understanding of smaller businesses at its core. the great successes of the last six These strengths were brought into sharp focus years and to give smaller businesses by our response to the coronavirus pandemic. the confidence to move from recovery to planning for growth. It is a tribute to the leadership of Keith Morgan and the hard work Leading commercially while and dedication of our people that providing widely the Bank was able to respond to the economic challenges of The Bank and our role within the Covid-19 so effectively. In just over UK economy has never been under four months* we helped deliver greater scrutiny as we work as a more than £51bn of critical trusted partner of government to support, with over 1.2m facilities create the conditions that will provided to businesses at their enable smaller businesses to time of greatest need. prosper and grow. Smaller businesses have shown The results reported in this set of great strength and resilience to accounts demonstrate that we survive and stabilise, and we can continue to make progress in be proud of the role we have delivering against our objectives played in helping them do so. There in order to address the structural is more to do, however, and we are challenges faced by smaller now looking forward to how we businesses in the marketplace can support them in the post-crisis when seeking the finance they recovery period and beyond. need to invest and grow. “ The British Business Bank is integral to supporting government in leading Britain’s recovery and its ambition to make the UK the best place in the world to start and grow a business.” 4 British Business Bank british-business-bank.co.uk Chief Executive’s statement Annual Report and Accounts 2020 The Covid-19 pandemic impacted Alongside commitments through need to go further, embracing the our financial performance towards our commercial arm, which best talent regardless of gender, the end of the financial year, with reached a record level of £952m ethnicity, age, location, or other the final adjusted return being in 2019/20, equally important are characteristics. below our target adjusted return the subsidised schemes which we for the first time in our history. As deliver on behalf of government. This is critical if we are to help we discuss further in the report, light the way for government, continuing economic uncertainty By addressing persistent market the finance sector and smaller means that the long-term impact failures in the supply of finance, business owners. our programmes help businesses on our investment valuations I take on the role of Chief and credit losses is not yet fully at all stages of development, from providing aspiring entrepreneurs Executive of British Business discernible. Nevertheless, our Bank plc at a crucial time for aim always is to provide solid with mentoring and funding to enabling a greater choice of smaller businesses and look commercial stewardship in forward to supporting them as deploying public funds irrespective finance options for well- established companies. they come out of the pandemic of the macroeconomic context. and thrive once more. The government recognised this capability in 2019, allocating us Supporting opportunity an additional £200m to invest We remain committed to in high-growth businesses as increasing opportunity for the UK leaves the EU and further businesses wherever they are in resources to enable up to £600m the UK by levelling up economic Catherine Lewis La Torre of funding for the UK’s world- activity through regional access CEO leading health tech and life to finance across the country. sciences sector. However, if we are truly to help the UK economy to thrive, we * As of 11 August 2020 British Business Bank british-business-bank.co.uk 5 Outgoing Chief Executive’s statement Annual Report and Accounts 2020 Outgoing Chief Executive’s statement Building throughout 2019/20 Our highlights of 2019/20 included Enhancing the launch of a new ENABLE Build programme to help fund smaller housebuilders, the expansion of our flagship Enterprise Finance capabilities, Guarantee to asset finance and asset-based lenders, and the publication of valuable research delivering into UK Venture Capital (VC) returns and the case for increased investment into VC by Defined effectively Contribution pension schemes. We also passed a major milestone for our Start Up Loans programme, From the start, we built flexibility with £500m lent since 2012.