The British Business Bank and NatWest have agreed to invest in funds run by Phoenix Court, the UK venture capital firm, in a deal its co-founder described as a “watershed moment” for domestic investment in start-ups.
The state-backed lender will commit £50m. NatWest, HSBC and M&G are investing alongside it and did not disclose the size of their commitments, but said the total would run to “several hundreds of millions”. It is the first time NatWest has invested in a venture capital fund. HSBC and M&G have backed earlier Phoenix Court funds.
Saul Klein, co-founder of Phoenix Court, said: “The UK innovation economy is absolutely steaming ahead. This is a watershed moment to have four major institutions, including some of the high street banks, coming together to demonstrate the scale of the opportunity. Hopefully this is the moment when we can start to see more domestic capital crowding in, and more British allocators backing our innovation economy.”
UK start-ups raised $17bn in the first half of this year, according to HSBC, more than France, Germany and Sweden combined. HSBC’s figures show only 30 per cent of the capital in funding rounds above $100m came from the UK, falling to 16 per cent in rounds above $250m, as shown in the record half-year funding figures.
“It’s not as if the capital isn’t there, but we would love more of that capital to be domestic,” Klein said. “It’s a real shame that the people benefiting from the growth of our innovation economy historically have not been British savers, or British beneficiaries.”
Klein, who has previously urged UK pension funds to back domestic tech scale-ups, said the fund would aim for a threefold return. It will mainly target the capital shortfall at the scale-up stage, but will look across all growth phases.
Paul Thwaite, chief executive of NatWest, said capital was not the only problem for start-ups, and that large investors could also provide “the expertise and networks that innovative businesses need to grow”.
“Too often, promising British businesses look overseas for the capital and support they need to reach the next stage,” Thwaite said. “If Britain wants to compete for the industries and jobs of the future, we need to get better at backing our most promising companies with the capital, connections and confidence to scale here in the UK.”
The British Business Bank was set up by the coalition government in 2014 to use state funds to support fast-growing businesses. The Labour government has raised its total financial capacity to £25.6bn, from £15.3bn, giving it a target of investing about £2.5bn a year. Ministers have told it to direct more than 60 per cent of its funds at scale-ups and given it more scope to invest alongside private-sector organisations. The bank has already put more than £600m directly into UK scale-ups.
Leandros Kalisperas, chief investment officer at the British Business Bank, said the announcement was “a milestone in the development of the BBB’s activity”, describing the bank as “a physical convener” as well as a deployer of capital.
The bank is also trying to co-ordinate a £1bn scale-up fund with leading pension funds. “Every week some of the largest pension funds in the country are coming together to consider how … to invest a billion pounds in scale-ups,” Kalisperas said. “That has never happened before.”
Institutional investors have been wary of start-ups and scale-ups because of their higher risk profile, regulatory barriers and a lack of expertise among investors. In May 2025, 17 workplace pension providers signed the voluntary Mansion House Accord, agreeing to invest at least 10 per cent of their funds in private markets by 2030. It followed the 2023 Mansion House Compact, which set a 5 per cent target.
Kalisperas, who previously worked in pension funds, said there were “many good reasons” why institutional investors had been slow to move into venture capital, and that there was “clearly so much more to do”. He said: “The institutional base in this country doesn’t know about venture.”
He said the bank needed to “showcase” its activities by “sharing our due diligence and information with domestic capital”. Of the reluctance to date, he said: “that’s almost the past.”
Amy Ingham
Amy Ingham is a reporter at Business Matters, covering UK business news with a focus on breaking news, business policy, late payments and insolvency. She joined the magazine in 2026 after completing the NCTJ Diploma in Journalism at Harlow College's journalism school. Her recent reporting includes British Steel's nationalisation and its impact on SME suppliers, the decline in late payments by large firms, and Insolvency Service director disqualifications. Reach her at aingham@cbmeg.co.uk.
