The UK government has announced a significant increase in funding for its public financial institutions, aiming to stimulate economic growth and support strategic sectors. Chancellor Jeremy Healey has allocated an additional £20.4 billion to the National Wealth Fund (NWF) and the British Business Bank (BBB), bringing the total funding for these “public financial institutions” (PuFins) to approximately £209 billion.
The National Wealth Fund will receive an extra £15.4 billion on top of its existing £27.8 billion capital, while the British Business Bank is boosted by £5 billion. Both entities are tasked with investing in line with government priorities under the current industrial strategy, but with a new emphasis on defence, critical minerals, artificial intelligence and associated supply chains, as outlined in a recent directive from Healey. The chancellor also encouraged the NWF to engage in projects linked to the government’s “new industrial age” ambition, including initiatives similar to the Good Growth Fund used by Andy Burnham during his tenure as mayor of Greater Manchester.
Ian Brown, the NWF’s chief investment officer, said the fund will maintain its focus on sectors like clean energy, life sciences and the creative industries while placing greater emphasis on defence. This shift is reflected in reported talks of the NWF potentially investing in Uforce, a London-based defence company that manufactures the “Magura” drone boat, known for its role in sinking Russian ships in the Black Sea.
Meanwhile, the British Business Bank is expected to enhance its support for strategically important technologies and capabilities. The BBB gained prominence during the COVID-19 pandemic by overseeing lending schemes such as bounce-back loans and the Future Fund, which notably invested in a range of companies including less conventional ventures. Despite the expansion, the BBB currently operates without a permanent chief executive. Leandros Kalisperas, its chief investment officer, indicated that the increased funding does not signal a major strategic shift but rather builds on existing priorities.
While these investments aim to bolster the UK’s industrial base and foster innovation, some commentators have questioned the financial returns and raised concerns about potential political influences shaping investment decisions. The Centre for Policy Studies noted that PuFin returns have so far trailed government bond yields. There are also concerns that funds may be directed toward projects driven more by political interests than commercial viability. For example, the NWF’s portfolio includes the £36.6 billion government stake in the Sizewell C nuclear plant and a £200 million investment in Grangemouth following the closure of its oil refinery.
Former Goldman Sachs economist Lord Jim O’Neill, a supporter of increased public investment, cautioned that oversight is crucial to prevent regional authorities from prioritizing projects based on local preferences rather than national benefit. O’Neill proposed establishing an independent body akin to the Office for Budget Responsibility to monitor such infrastructure spending.
From the perspective of industry players like Rob Harper, founder of Bristol-based Rowden Technologies, PuFins provide critical capital to retain growing businesses in the UK and avoid foreign takeovers. Harper’s company, which employs 230 staff and plans to expand by 400 more over two years, said the National Wealth Fund’s support helped secure its independence while aligning growth with government objectives.
As the government pushes forward with this substantial financial backing, the success of these public financial institutions will depend on balancing economic returns with strategic national interests, all while addressing scrutiny over transparency and investment discipline.