Government to buy stakes in tech start-ups, report

'FinTech is one of the UK's great success stories and will help us seize new opportunities around the world', says Rishi Sunak

Chancellor Rishi Sunak is preparing to unveil a new fund that will invest £375 million into fast growing tech start-ups in the UK.

The new initiative, called 'Future Fund: Breakthrough', could be announced as early as Wednesday in the Budget, according to Financial Times sources, potentially leaving the taxpayer with stakes in multiple young companies.

The Chancellor's new initiative will be aimed at the firms that have the potential to boost the UK's position in the technology industry but lack funds to compete on a global scale. Many of these firms are currently loss-making due to the need for investment in their research and development efforts.

According to the FT report, investments made under the new initiative will be in the "tens of millions of pounds" range and will be matched by private sector venture capital.

Rather than focusing on all start-ups hit by the Covid-19 pandemic, the fund will initially invest in a relatively smaller number of companies with established business models.

The tech sector will be a major focus in the Budget, according to the FT, with Sunak last week saying that he will launch a new tech visa programme to help tech firms attract highly skilled workers.

"Now we've left the EU and taken back control of our borders, we want to make sure our immigration system helps businesses attract the best talent from around the world," Sunak said while launching the new tech visa scheme.

Since April last year, the government has invested more than £1 billion in about 1,000 start-ups across the country through a separate 'Future Fund' initiative. That fund, which is part of the government's Covid-19 business support programme, was launched in April and offered loans to start-ups that struggled during the pandemic. In 37 firms, the government loans have been converted into equity stakes, enabling the taxpayer to become a shareholder in a broadband provider, a toilet maker and a company that manufactures reusable cups.

The UK currently has about 10 per cent market share in global FinTech, and Sunak wants it to grow further.

"FinTech is one of the UK's great success stories and will help us seize new opportunities around the world," he said.

"We must now build on our global reputation for fostering innovative start-ups and ensure firms can access the talent, finance and support they need to scale up here in the UK."