British taxpayers lose £400m as result of investment fund set up by Sunak

UK taxpayers have lost £400m after the collapse of hundreds of startups backed by a heavily-criticised Covid-era investment fund launched by former prime minister Rishi Sunak.

The so-called Future Fund had originally spent £1.14bn backing 1,190 companies, including those not usually associated with government portfolios, such as the sex party organiser Killing Kittens and now-defunct festival tickets business Pollen. The fund also invested nearly £2m in companies linked to Sunak’s wife, Akshata Murty.

However, the Department for Business and Trade’s latest annual report showed that 334 companies backed by the Future Fund had since gone under, costing the taxpayer hundred of millions of pounds.

The report showed the value of the fund tumbled to £609m as of March this year. But the British Business Bank, which administered the scheme, clarified that the number was in fact higher due to income and returns from their investments, at £736m. That has left taxpayers with a £400m loss since the scheme closed in 2021, the BBB said.

The Future Fund was launched in May 2020 by then chancellor Sunak to help emerging businesses during the pandemic. Under the scheme, the BBB would lend firms between £125,000 and £5m, matching parallel investments from private investors, with the loans converting into shares when the company next raised money from investors.

It left the government with investments in companies including Secret Group Limited, the firm that runs the Secret Cinema series of immersive film events, as well as ski-suit maker Oneskee, and Oto International Limited, which makes the cannabis extract CBD oil.

The scheme had required ministerial direction – an instruction from ministers – before its launch, because it was not possible to determine that it would be value for money. And shortly after the launch, the BBB’s former chief executive, Keith Morgan, warned ministers the scheme would mostly attract “second-tier” companies that could not attract investment from elsewhere and that achieving value for money for the taxpayer was “highly uncertain”.

The scheme closed to new applications in 2021.

The business department’s annual report showed that 3.9% of its investments – about 47 firms – were flagged for suspected fraud, amounting to £79.5m of the Future Fund’s total investment.

A British Business Bank spokesperson said it was “too early to give an indication of the overall Future Fund performance, however, due to the size of the portfolio and the commercial nature of the third-party investors, we expect it to track the market over time, albeit it was not set up and run as an actively managed fund.”

The Department for Business and Trade was contacted for comment.