The Future Fund, a £1.14 billion portfolio of investments established by former Conservative prime minister Rishi Sunak during his tenure as chancellor, is facing a growing number of bad investments. Managed by the British Business Bank (BBB), the fund provided loans to 1,190 primarily early-stage companies between May 2020 and July 2021 as part of the UK government’s Covid-19 stimulus spending.
Under the terms of the funding, businesses were required to raise a funding round that included a company valuation within three years or repay the full amount of the loan, along with a 100 percent premium and any accrued interest. Court records reveal that the BBB has filed winding-up petitions for 27 companies in the Future Fund portfolio since the beginning of the year, ahead of the July deadline for final redemptions on the three-year convertible loans.
One notable example is the investment app Gather, partially owned by Arsenal football star Jorginho, which owes the BBB £3.6 million on its convertible loan. Gather’s administrator reported that its owners “did not appreciate” that the BBB would expect repayment, assuming the loan would automatically convert to equity after three years. The company also owed £120,000 to Soho House, the private members’ club, whose annual festival it launched last year. With total debts of £6.1 million, Gather has been offered £400,000 for its business assets, leaving unsecured creditors like the BBB and Soho House with just six pence in the pound after tax.
An additional 20 companies have been placed into liquidation, according to Companies House records. While some businesses backed by the fund have shown promise in the tech sector, the scheme has faced scrutiny for funding more unusual enterprises, such as a cannabis products company and a sex party planner.
The BBB offered more than 500 companies the opportunity to extend their loans by up to two years in January 2023, subject to support from other investors and customer due diligence. However, a minority of applicants were unsuccessful, while others in the portfolio had breached the terms of their loan. As of the end of June, 152 loans worth £131 million remained outstanding, with the majority having been extended.
Regrettably, 258 businesses in the portfolio have gone insolvent, costing taxpayers £226 million. The BBB reported a £122 million post-tax loss in its latest financial year, largely due to falling start-up and tech valuations. The Future Fund portfolio, which sits on the Department for Business and Trade’s balance sheet, was not included in this figure. The BBB has stated that it has a duty to protect taxpayers’ interests and will take steps to wind up any company it believes is insolvent or in breach of the loan agreement.
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