The government's Future Fund, launched to support the UK’s innovative businesses affected by Covid-19, was an undoubted success providing over £1.20bn worth of convertible loans to 1,236 UK companies including many in the life sciences and healthcare sector.
With Future Fund closing to new applications in January 2021, Chancellor Rishi Sunak announced in his spring budget that the government will this summer be launching its successor – Future Fund: Breakthrough – a £375m UK-wide scheme to encourage private investors to co-invest with the government in high-growth and innovative UK companies.
Future Fund: Breakthrough is intended to support research and development (R&D) intensive companies, accelerate the deployment of breakthrough technologies which can transform major industries, develop new medicines, and support the UK transition to a net-zero economy – so will be of great interest to companies in the life sciences and healthcare sector.
Full details of the scheme are yet to be announced, but R&D-intensive companies with significant UK operations that aim to raise at least £20m will be eligible to apply – with the government taking equity alongside private investors. The scheme will be delivered by the British Business Bank, via its commercial subsidiary British Patient Capital.
The launch comes alongside the government's recently announced sovereign investment partnership with Abu Dhabi’s Mubadala Investment Company, which will invest £1bn in UK life sciences over five years. An initial £800m commitment from Mubadala will be deployed alongside the UK’s £200m Life Sciences Investment Programme. The recently established UK Office for Investment will work together with Mubadala to identify commercially viable opportunities for investment into the sector.
The UK BioIndustry Association (BIA) has recently announced that UK biotech companies are on track for a record-breaking year of fundraising with more than £830m raised in fresh capital between December 2020 and February 2021. There has been £7.2bn of venture capital invested globally into private biotech companies, of which £888m has been in Europe, the BIA reports. Venture capital investment in UK companies accounted for almost 38% of the European total.
Osborne Clarke comment
The announcement of both the Future Fund: Breakthrough scheme and the government's sovereign investment partnership with Mubadala will serve to help the sector grow and companies to scale at pace as they seek to address a key constraint in the funding landscape for companies in the life sciences and healthcare sector – access to capital. Investment in, and development of, new technologies will be a critical catalyst for the UK’s economic recovery in the coming years and matching public money with private capital will go a long way to supporting this recovery. What remains to be seen is how the government will engage, or expect to engage, with companies as a shareholder.