NATWEST AND BRITISH BUSINESS BANK BACK PHOENIX COURT VC FUNDS

The British Business Bank and NatWest have agreed to invest in venture capital funds run by Phoenix Court, with HSBC and M&G also backing the firm's funds as part of a combined commitment that the parties say will total several hundred million pounds. The British Business Bank has committed £50m, according to the firms involved, while the individual sums put in by NatWest, HSBC and M&G have not been disclosed. It marks the first time NatWest has invested directly in an independently managed venture capital fund, and the investment spans Phoenix Court's Localglobe, Latitude and Solar funds, which back companies from early funding rounds through to scale-up stage. Saul Klein, co-founder of Phoenix Court, described the deal as a "watershed moment" for domestic investment in Britain's innovation economy. Paul Thwaite, chief executive of NatWest, said banks could help provide the capital, expertise and networks that growing British businesses need.

UK start-ups raised $17bn in the first half of the year, according to figures cited by HSBC, more than France, Germany and Sweden combined. Despite this, HSBC's figures show only 30% of capital in funding rounds above $100m came from UK sources, falling to 16% in rounds above $250m. The British Business Bank has separately said more than 80% of scale-up funding raised by the UK's most successful companies still comes from overseas investors. Phoenix Court estimates there are around 1,800 venture-backed British companies generating more than £20m in annual revenue, yet fewer than 1% have received backing from major UK asset managers linked to the Mansion House initiative. Klein said he wants to see more domestic capital, including from British pension funds, supporting the sector.

NatWest's investment follows the launch of its dedicated Venture Banking business earlier this year and forms part of a wider effort by government and the City to direct more of Britain's domestic savings towards fast-growing private companies. Klein said the new funding would target the capital shortfall particularly at the scale-up stage, while also looking across earlier growth phases. Thwaite said Britain needs to improve at backing its most promising companies with capital and confidence to scale domestically. Phoenix Court said it hopes the agreement will encourage further British institutions to commit capital to the domestic innovation economy.