The British Business Bank, a state-owned financial institution, has long defined its core purpose as supporting the growth of smaller enterprises across the United Kingdom. Its official website clearly states that its mission is to drive economic growth by helping smaller businesses secure the finance they need to 'start, scale and stay in the UK'. This focus has traditionally addressed well-documented gaps in the financing ecosystem, particularly for tech startups, life-science ventures, and university spin-outs that struggle to attract early-stage capital.
A Significant Departure from Core Objectives
However, the BBB's recent decision to make a £25 million equity investment in Kraken Technologies has raised serious questions about potential mission creep. Kraken, a sophisticated software platform being separated from the Octopus Energy group ahead of a potential stock market listing, is valued at a staggering £6.45 billion. This valuation would place it within the FTSE 100 index if it were already publicly listed, positioning it among some of Britain's largest corporations.
Questionable Alignment with Stated Goals
This investment represents a substantial departure from the BBB's usual activities in two critical respects. Firstly, Kraken cannot reasonably be classified as a small business by any conventional metric. Secondly, the notion that the BBB's relatively modest contribution was essential to the success of Kraken's wider $1 billion fundraising round appears tenuous at best. The round was led by the US fund DI Capital Partners, and Kraken itself boasts recurring revenues of approximately $500 million.
With the BBB's stake amounting to just 0.35% of the company, it is difficult to argue that this investment represented a make-or-break element for a firm valued at 17 times its annual revenues. Business Secretary Peter Kyle has attempted to frame the investment as part of efforts to encourage Kraken to choose London for its eventual listing, rather than New York, but the persuasive power of such a small stake remains questionable.
Political Dimensions and Expanding Mandates
The political context adds another layer of complexity to this transaction. Greg Jackson, founder of Octopus Energy, described the choice of listing venue as a 'coin toss' between the UK and US markets, while acknowledging that the BBB's investment provides 'a seat at the table'. In reality, a 0.35% stake represents more of a stool in the corner than a commanding position at the boardroom table.
The BBB has defended its decision by stating that it was 'too good an opportunity to miss' and that it ensures UK taxpayers gain exposure to one of the country's fastest-growing companies, given that most other investors are international. While the bank's intention to generate financial returns is understandable, this rationale seems to signal a quiet rewriting of its investment mandate.
A Changing Landscape for Public Investment
This shift coincides with significant changes to the BBB's operational parameters. Following last year's Treasury spending review, the bank's permanent capital was increased by £6.6 billion to £25.6 billion. Simultaneously, its authority to make direct investments in single companies was raised from £15 million to £60 million. These expanded capabilities suggest that further investments in well-established, large-scale companies like Kraken may become more common.
The fundamental question remains whether such investments represent an appropriate use of public funds intended to support smaller businesses. While the Kraken investment may prove financially successful for taxpayers, it appears to stretch the definition of the BBB's original mission beyond recognition. Greater transparency regarding the new investment rules would help clarify whether this represents strategic evolution or genuine mission creep.
As the British Business Bank continues to navigate its expanding role within the UK's economic landscape, the Kraken case highlights the tension between supporting genuine startups and chasing high-profile investments in already-scaled companies. The balance between these objectives will likely define the institution's effectiveness and public perception in the years ahead.
