A consortium of major UK pension providers has committed to exploring the establishment of a new UK Scale-up Fund worth more than £1bn to invest in high-growth British science and technology companies.

The proposed vehicle would seek to increase the supply of domestic growth capital and give pension scheme members greater access to potential returns from successful UK businesses.

It would target companies seeking funding to scale, commercialise new technologies and create skilled jobs across the country.

The consortium includes Railpen, Nest, Local Pensions Partnership Investments (LPPI), LGPS Central and Border to Coast.

The British Business Bank is working alongside the pension providers to support the development and launch of the fund, with the intention of investing in partnership with the group.

The Office for Investment is also supporting the consortium as it explores the structure and establishment of the vehicle.

The group said the fund would aim to connect institutional pension capital with UK companies, founders and venture managers operating in science and technology.

By pooling capital from several large pension investors, the initiative is intended to create a vehicle of sufficient scale to access leading investment opportunities emerging from UK innovation.

The consortium argued that the approach could deliver attractive long-term returns for members while supporting companies to remain and grow in the UK.

Prime Minister, Andy Burnham, described the proposed fund as a vote of confidence in British businesses and workers.

“This new fund would help unlock good growth in every postcode, connecting pension investment with the entrepreneurs and technologies that will reindustrialise Britain and create the jobs of the future," he said.

Burnham added that the fund could create more opportunities for workers, improve returns for savers and encourage businesses to start, expand and remain in the UK.

Chancellor of the Exchequer, John Healey, said the UK needed to improve its record of supporting domestic companies beyond their early stages of development.

“We create great companies in Britain but don’t do enough to grow them with British capital and keep profits in the UK,” he argued.

“I want the UK to become the best place in the world both to start and scale a business, with investment, jobs and skills in every region.”

Echoing this, Railpen chief executive officer, Andy Bord, said: “The UK Scale-up Fund represents a compelling investment opportunity where disciplined, patient capital can help growing companies scale, provide attractive returns for pension savers and generate lasting economic growth.”

Bord noted that Railpen had helped shape the initiative and believed it could support UK companies with global ambitions to continue building their businesses domestically.

Meanwhile, Nest chief executive officer, Ian Cornelius, stressed there was strong potential alignment between pension investment, member outcomes and economic growth.

“As a long-term investor on behalf of more than 14 million members, Nest sees an important role for pension capital in helping successful UK businesses access the funding they need to grow," he added.

“We believe there can be a strong alignment between delivering attractive long-term outcomes for members and supporting innovation, job creation and economic growth across the UK.”

LPPI chief executive officer, Chris Rule, also commented: “This cross-industry initiative will give pension funds the opportunity to generate sustainable, long-term returns whilst supporting the next generation of British success stories."

Rule argued that collaboration would be central to the fund’s success, highlighting the experience of Local Government Pension Scheme (LGPS) investors in building scale through collective investment.

LGPS Central chief executive officer, Richard Law-Deeks, stated that the proposed fund could provide a practical route for long-term LGPS capital to support UK growth while delivering appropriate investment outcomes.

“We invest on behalf of millions of scheme members, and every investment decision starts with our responsibility to deliver strong long-term outcomes for them," he continued.

“The proposed fund could help bring together institutional investors at scale and improve access to opportunities that may otherwise be difficult to achieve individually.”

Border to Coast chief executive officer, Rachel Elwell, added: “By combining scale, collaboration, investment discipline, and a strong pipeline of high-quality opportunities, this initiative can help deliver attractive long-term outcomes for pension savers while enabling more innovative UK businesses to grow and compete.

British Business Bank chief investment officer, Leandros Kalisperas, described the announcement as an "important step" in strengthening the UK’s capital formation ecosystem.

“By bringing together long-term pension capital with the UK’s most ambitious growth businesses, we have the opportunity to create a virtuous cycle - supporting innovation, attracting further private investment, and delivering strong long-term outcomes for pension savers," he said.

UK Private Capital chief executive, Michael Moore, welcomed the initiative but urged more defined contribution (DC) schemes to increase allocations to venture and growth capital.

“The new UK Scale-up Fund is a welcome signal that the government understands the urgency of getting more domestic capital mobilised into venture and growth capital to close the scale-up gap,” he said.

Moore added that pension capital needed to reach specialist venture and growth managers with the expertise and track records required to identify and support successful businesses.

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