Managing partner outlines his strategy for the British Business Bank’s new British Growth Partnership investment arm
British Business Bank (BBB) announced the launch of British Growth Partnership (BGP) in October 2024 and it has been progressing rapidly ever since. The new regulated investment advisory and fundraising arm initially attracted agreements from NatWest Cushion and Aegon UK to work with it, with a view to making investments in the initial fund, and these were later joined by London CIV.
The fund manager received regulatory approval in May, is currently engaged in fundraising and has plans to start deploying capital this year.
Ian Connatty is the managing partner of BGP. Before taking the role last year he was the deputy chief investment officer of BBB. He hasbeen investing in venture capital (VC) for almost 17 years, including a spell at startup data centre operator Infinity SDC.
What is the big idea behind BGP?
Connatty: The aim is to marshal more UK institutional capital into our country’s high-potential companies – it’s the same idea that drove the Mansion House Accord. In its first iteration, we will focus on addressing the UK’s scale-up challenge.
Becoming regulated was a key milestone as it allowed us to formally launch the fundraising process. BGP will provide seed capital alongside other investors. We have the three that have agreed to work with us and continue to engage with the market. We are currently fundraising and plan to start investing by year end. We anticipate this will be the first of a series of funds.
How will BGPs roots in BBB impact how it operates?
Connatty: BBB is the largest limited partner (LP) in UK venture capital (VC) funds. It has developed a solid track record and will continue to deploy capital. BBB has its own mission and purpose as a strategic LP, with a return requirement in its government mandate. BGP will act as its regulated fund manager on a fully commercial basis.
Our intention is to open BBB’s pipeline and platform to external investors. The BBB invests directly in UK scale-ups and has a portfolio of 31 direct investments of technology and life sciences companies. BGP will give pension funds access to the bank’s network and live pipeline of scale-up businesses.
The BBB also knows many GPs so we can leverage our network to drive deal flow. The recent Spending Review settlement added more capital to BBB so it can continue its role. BBB is helping to catalyse and draw in capital, whether by anchoring funds or via BGP. It naturally provides BGP with opportunities to co-invest with organisations in its network.
We’re looking to draw on BBB’s perspective and market insight to catalyse more capital. We are one bank, so we engage with the market as one bank. We will work together to catalyse external capital – BGP adds a new way to do this. When we invest in a fund, we hope to crowd-in money alongside us to scale-up and support larger rounds.
The intention is to work with the market, not to lead rounds. We will work alongside fund managers that have a relationship with BBB, even if they have not invested together. We will collaborate with other managers.
The UK has plenty of GPs, including ones that focus on high-growth companies. What unique attributes does GBP bring to the market?
Connatty: Our role is to draw more pension fund capital into VC – but others aim to do that as well. There are lots of other managers that will be conduits to catalyse institutional capital. That is what the market needs. BBB has historically tended to focus on technology and innovation – but we will work through strategy issues with our prospective investors.
What is lacking in the UK market and what lessons can be learned from elsewhere?
Connatty: The UK is good at starting companies but needs to improve how it scales them. The UK starts technologies and incubates them – but other countries ultimately reap the rewards. Our chair [Stephen Welton] is keen to avoid the UK being an incubator economy.
The US has proven to be far more effective at making the most of innovation. US companies typically raise £2 for every £1 UK companies raise as they progress through funding rounds. We aim to deploy co-investment capital to close that gap.
The US demonstrates that retirement savings can form a long-term investor base that supports larger funds.
It is very good at drawing pension funds into VC while we haven’t been as good at marshalling retirement savings. Over 70% of US VC capital comes from retirement savings, while it’s about 10 % in the UK. We will not necessarily fund more companies, rather better fund companies the market already supports.
Is the priority to ensure UK companies retain UK ownership – or to ensure UK companies have enough funding? Would BGP take US capital?
Connatty: Our broad mission is to catalyse more domestic capital into UK companies. A major part of us not being very good at scaling companies is to do with the capital’s origin. The origin undoubtedly makes a difference to the ultimate destination of the company. But it’s also about making sure companies are fully funded in the first place.
To what extent is the lack of scale-up funding due to the transition from maturing DB schemes to DC master trusts?
Connatty: It’s absolutely a factor. There is an ongoing transition of capital being sourced from legacy DB schemes to new DC arrangements. We need to ensure DC funds have access to productive assets.
Time is also a factor. VC has been around longer in the US. Long-term investors have been allocating for quite some time, so they’ve had longer to understand it, build datasets and establish the investment case. Europe, including the UK, is less mature and growth naturally compounds over time.
VC is an on-ramp to the future economy. It wasn’t widely discussed at LP events three years ago – but now I often get invited to speak. The conversation has moved from ‘should be done at all?’ to ‘what’s the best way to make it happen?’ I find this very encouraging.
To what extent are BBB and BGP dependent on future Spending Review settlements? Do the government’s objectives have any influence?
Connatty: BBB is a public institution and just had a meaningful Spending Review settlement. But I’m focused on the BGP’s mission of catalysing institutional funding and trying to put everything together. The focus and strategy of the fund is to collaborate with other investors.
The 2025 settlement made BBB’s capital base permanent. There are slightly different ways of funding high-potential innovative companies, BBB and BGP do so in different ways but have the same mission.
What lessons have you personally brought to BGP?
Connatty: I’ve been in this ecosystem a long time. When I started, the issue was how to get more startups. The UK is now good at starting companies so it’s more about how we make the most of them – how we scale them to become meaningful, independent businesses and ultimately global champions.
The scale-up problem has been around for a long time. The desire behind the Mansion House Accord was to get more institutional capital into productive finance assets. There was an opportunity to make a real difference, both to institutional investors, which historically only made small allocations, and innovative companies seeking finance.
The intractable problem of companies getting stuck at scale-up needs to be addressed once and for all. After such a long time in the sector, it finally feels like a lot of strands are coming together to make a meaningful dent in the problem. There has been a meaningful step change in the scale-up landscape and more companies are breaking out. Our goal over the next 10-20 years is to ensure there is a real possibility of developing globally significant companies. I’m very excited about the road ahead.
Is there a potential conflict between maximising returns and supporting the UK economy? How do you balance the desire to keep companies in the UK with potentially better returns from a US listing?
Connatty: Companies must ultimately make decisions in the best interests of their stakeholders. For more companies to list in the UK, the first task is to create more companies capable of being listed. This means helping more companies break through from scale-up to large-scale. Then we can worry about where they IPO.
The second aspect is to bring more domestic capital to the table at the point companies need to make those sorts of decisions. Companies can then decide whether remaining in the UK is right for them. The more ‘shots on goal’ we have, the more companies will decide their long-term future is in the UK.
Alongside the listing domicile is the location of the economic impact – where R&D jobs are created, where high value work is done, and where wealth is created and recycled. US companies spawn people who know how to make money and scale. They go on to become angels and operators, so the ecosystem becomes self-fulfilling. Capital markets are not the only part of the story. There’re plenty of economic impacts and spin-off benefits – even when firms decide to list elsewhere.