The British Business Bank, the government’s economic development agency, has reported a loss of £122 million for the year ending March, marking its second consecutive year in the red due to declining valuations in private equity markets.
Chief Executive Louis Taylor attributed the loss to “short-term falls in the book valuation of long-term investments,” stressing that these were unrealised losses rather than actual cash deficits. This follows a £135 million loss the previous year, contrasting sharply with the £453 million profit recorded in 2022, driven by a pandemic-fuelled tech boom.
Despite the downturn, Taylor expressed optimism, noting that the decline in valuations in the venture capital sector seems to be stabilising. He stated, “If you’d offered us these numbers last year, we would have taken them.”
David Hourican, Chief Financial Officer, indicated that the bank is not currently in the “harvesting period” for most of its investments. Taylor also mentioned that the bank ultimately aims to more than double its investment returns.
The British Business Bank, which supports debt and equity investments in SMEs, made funding commitments of £2.3 billion last year. The bank is also exploring a new investment vehicle involving pension funds to support fast-growing private companies, a move not dampened by the recent on-paper losses.
As it celebrates its tenth anniversary, the bank’s impact report highlights its significant contributions, including the creation of nearly 40,000 jobs and adding £8.4 billion to the economy in 2023.
Chairman Stephen Welton noted that the new investment vehicle aims to address the UK’s shortage of institutional investment, with the bank being tasked to “crowd in private investment.” He remains confident in the positive economic impact this initiative could deliver.
The bank is in discussions with ministers about reforms to increase its independence, potentially allowing it to reinvest its generated returns. The reported loss does not include the bank’s management of the government’s multibillion-pound pandemic finance programmes, which are not recorded on its balance sheet.
