The government-owned British Business Bank has announced that its annual profit tripled to £426 million for the year ending March, benefiting from a significant increase in the valuation of its investments. The UK's economic development bank, which provides loans and equity stakes to smaller businesses, recorded its highest profit in four years, up from £144 million the previous year.
Profit driven by investment valuations
The profit surge was primarily fueled by higher valuations of the bank's investments in funds and businesses. The bank generated approximately £115 million in realised gains from selling equity in companies it had invested in, compared to £84 million the prior year. The British Business Bank, funded by the Department for Business and Trade (DBT), stated that this performance demonstrates its ability to generate returns for UK taxpayers.
However, the bank acknowledged the uncertain economic environment, citing factors such as the conflict in the Middle East that could impact valuations in the short term. It emphasised that its focus remains on delivering realised returns over multi-year investment cycles, and year-on-year fluctuations are expected.
Deployment of capital and regional focus
During the financial year, the bank deployed £1.5 billion into a mix of new and existing investments. Notably, 87% of newly funded businesses were based outside London, a higher proportion than the overall business population. The bank also noted a reduction in costs related to Covid-19 loan schemes as they continue to wind down. The bank administered government loan schemes during the pandemic and faced criticism over an estimated £1.1 billion lost to fraud and error.
Support for industrial strategy
The British Business Bank has received additional funding to support the government's industrial strategy, focusing on priority sectors such as clean energy, defence, life sciences, and financial services. The bank said this will enable it to step up activities and encourage investment in UK-based firms, preventing them from moving overseas.
