The Government-owned British Business Bank has revealed its annual profits have tripled after benefiting from a jump in the valuation of its investments.
The UK’s economic development bank, which lends money to and buys stakes in smaller UK businesses to help them start and grow, is also set to be boosted by supporting the Government’s industrial strategy.
It recorded a pre-tax profit of £426 million for the year to March, almost three times the £144 million generated the previous year and the largest profit in four years.
This was driven by an increase in the valuation of its investments in funds and businesses.
The bank generated around £115 million worth of realised gains from the sale of equity in companies it has invested in, up from £84 million the prior year.
The British Business Bank, which gets funding from the Government’s Department for Business and Trade (DBT), said the increase points to its ability to generate returns for UK taxpayers.
But it acknowledged that the wider economic environment was “uncertain with a number of factors both locally and internationally which may impact on valuations in the short term” including from conflict in the Middle East.
“The bank is ultimately focused on delivering realised returns at the end of multi-year investment cycles, therefore, year-on-year fluctuations are to be expected,” it insisted.
The bank’s annual report showed that it deployed £1.5 billion during the latest financial year into a mixture of new and existing investments.
Some 87% of newly funded businesses were based outside of London, a higher proportion than the business population more widely, according to the firm.
Furthermore, costs in relation to the Covid-19 loan schemes reduced last year as they continue to wind down.
The bank administered the Government’s loan schemes to businesses during the pandemic, and landed in hot water over the loss of an estimated £1.1 billion to fraud and error.
Meanwhile, the bank has been allocated extra funding to support the Government’s industrial strategy and invest in priority sectors such as clean energy, defence, life sciences and financial services.
It said this will help it to step up activities and encourage investment into firms to grow in the UK rather than move overseas.