In this episode of the Guernsey Finance podcast, host Brandon Ashplant interviews Tom Taylor from the British Private Equity and Venture Capital Association (BVCA). They discuss findings from the latest Frontier Economics report, titled The Value of Guernsey’s funds industry to the UK’s growth ambitions, which explores the significant role of private capital in driving sustained growth across the UK's four nations, through finance centres like Guernsey. They also talk through the current landscape of British PE/VC.
Read the full report now: https://www.guernseyfinance.com/industry-resources/literature/general/the-value-of-guernseys-funds-industry-to-the-uks-growth-ambitions/
Read the full transcript:
Brandon (00:00)
Hello and welcome to the Guernsey Finance podcast, where we bring you interviews with leaders from the global finance industry, as well as news and developments from Guernsey's financial services sector. My name is Brandon Ashplant and I am Technical Manager, funds and private wealth here at Guernsey Finance. For those of you who aren't familiar with Guernsey, the island is a leading global finance centre, the success of the industry here is underpinned by economic substance, political stability and asset security. And we are committed to the cause of sustainable finance.
To find out more about Guernsey's success in sustainable finance, tune into our sister podcast, the sustainable finance Guernsey podcast. Today though, I'm delighted to be joined by Tom Taylor, Head of Policy, Legal and Regulatory at the British Private Equity and Venture Capital Association, otherwise known as the BVCA. The BVCA represents the UK's community of institutional investors and supports their membership in enabling private capital to drive innovation, build British business and support communities and key sectors to achieve sustained growth. One of Europe's largest economic consultancies, Frontier Economics, has recently published a report titled The Value of Guernsey's Funds Industry to the UK's Growth Ambitions.
The report outlines in both quantitative and qualitative form, the value add of Guernsey as a leading centre for investment funds how the industry is supporting economic growth across the UK.
In this podcast, we will be discussing some of those key findings from the report how private broadly is providing investment into critical sectors and industries across the UK economy and into all four nations and the outer regions of the country as well.
We will be exploring how the UK government's growth objectives are being supported, as well as how international finance centres such as Guernsey play such a vital role as members of the British family in channeling international capital in the form of foreign direct investment into the UK. So without further ado, welcome Tom.
Tom Taylor BVCA (02:11)
Thank you. Hi. Hi. Thanks for having me on the show, really appreciate it. I'm really excited to be here to talk about something that I am pretty about, which is the role of private capital investment, the role it plays
in the UK economy, really as a force good.
So, yeah, first of all, thanks very much for... for having me on the show.
as you said, I'm Head of Policy at the BVCA, the British Private Equity and Venture Capital Association. So the industry member organisation that represents the private capital investment fund industry in the UK and the kind of broader.
We have kind of two key roles. One is a forum for discussion within the industry, it's a very kind of long-term relationship, people driven industry. So there's a need people to get together and talk issues within the industry and also second thing is that we are the representative body. So we on behalf of the industry to external stakeholders, which is the press and media, but principally the government and we've been involved in a lot of. This is an industry really that raises what the private capital industry is, is industry that raises capital from principally institutional investors really around the world invests that capital on behalf of those investors in investments that really spur the growth of private and that's where the private bit in private equity and private capital comes from. It's private companies, so smaller companies with less than 250 not publicly listed and ones that have got the potential to really grow far and fast if they get capital and crucially support in expertise of business growth that the private capital firms done that kind of investment many times before. So my job within all is to talk to the policy side. So talking to policymakers, regulators, the government about the detail of how all this kind of growth focused investment industry works and trying to help them to develop sensible that allows the industry to thrive in the wider policy context. So that's me and thanks for having me.
Brandon (04:54)
That's a great introduction and, yeah, great overview.
So diving straight in, the UK has continued to be seen as a leading hub in Europe for, if not the world as well, but for venture capital and private equity financing. I think it's fair to say.
Could you give us an outline of what the current state of the British sort PEVC landscape looks like at present?
Tom Taylor BVCA (05:22)
Yeah, of course. So indeed, you are right that the UK is, not just seen as a leading hub, but is a leading hub in private capital investment globally. That's pretty evident in the fact that the UK is the second largest private capital investment hub in the world. That's for the whole gamut of different types of private capital investment behind only the US and then in the venture segment in particular we are the third largest jurisdiction in the world behind the US and China. China's got a kind of disproportionately large focus on venture capital which puts it above the UK in that space but other than that globally second biggest in the world and if you look at the actual industry itself, so the private capital investment firms, the investors, the banks, the lawyers, the accountants and the whole ecosystem, that in itself is quite a large part of the UK FS, financial services economy, employs around 144,000 people just in that industry. But then, I guess more importantly for the UK economy than that,
the impact that this industry has in terms of investing, know, the business that it does, which is investing into private companies is really important to the UK. So just to give you a sense of that, the BVCA members are currently back, have invested in 13,000 UK businesses that are collectively responsible for seven percent of UK GDP, which is quite a large chunk of the economy, and employ around two and half million people. So it's a really big industry, it's a real national success story that's had a big impact on the real economy or on people's lives and one that I think we as a country and the wider British family should be really proud of.
In terms of the more granularly relation to the ecosystem. It's kind of split into different segments which each aims at supporting the growth, helping companies to grow that are at different stages in their kind of growth journey, so different sizes. And I'll just kind of whip through the four of those and say why they're important. So the first is venture capital. So this is firms that invest in
Brandon (07:49)
Mm.
Tom Taylor BVCA (07:56)
small earlier stage, very kind of innovative companies. And the aim now is to support those companies to grow really far and really fast. And so you think about Oxford, Cambridge, innovation to tech, deep tech kind of corridor. Think about, think Darktrace, Revolut, Deliveroo, WISE. These are all companies that have come into the kind of national consciousness pretty quickly because their growth has been fuelled by venture capital investment at that innovative smaller starting point and of the spectrum. Then you've got lower mid-market, growth capital and small private equity firms. These invest in more mature businesses. You might not have heard so much of these, they're smaller companies often based in the nations and the regions of the UK.
And the aim there is to find companies that are a bit more mature, but they've still got a lot of growth potential and then kind of supercharge them help them to professionalise, expand around the country or abroad, become more productive, create more jobs, be more sustainable, that kind of thing. So that's kind of lower mid-market, very important for the nations and regions of the UK smaller companies’ growth story. And then you've got pan European mid-market private equity. And that is even yet more mature companies that might want to expand new product lines or around the rest of Europe or globally. And here there are some kind of well-known brands think, Pret a Manger, Mountain Warehouse, things like that. I'm just using the ones that people might have heard of there. But there's a lot of
Brandon (09:33)
Hmm.
Tom Taylor BVCA (09:36)
kind of business to business ones that people won't have but very important to the economy. And then at the largest end of the scale you've got global capital So that's really the largest private companies the aim of investing in those is to boost their growth Implement new strategies etc. And think you can think there of companies the well-known ones again like ASDA and boots. So that's all equity and debt investment through private credit funds again different stages of companies journey. So it's a pretty, you know, diverse mosaic of different firms investing at different parts of different types of companies growth But the aim across the whole piece is to really fuel the growth of those different sizes company. And that's got a really important role to play in the UK economy, I would argue.
Brandon (10:26)
Yeah, certainly. And I think that sort of feeds into the next question, I suppose, because you sort of touched there on how this, you know, the British family is very diverse, whether you go to the outer regions or the nations, there's, the hubs there have different specialties, don't they, compared to the city that is more, maybe more traditional. So what, I guess, getting to the crux of it, you know, what makes the British family as a cohesive sort of, family unit, if you like, so competitive in this, in this space, internationally speaking?
Tom Taylor BVCA (10:53)
It's a very good question and you probably get different answers to it. But for me, I think principally, we've got a system, we've got an ecosystem that's really, really good at drawing in capital from around the world. 85 % of the capital that's raised by firms that are members of the BVCA is from overseas. So that just kind of underlines how...
the UK has become this hub that kind of pulls in capital to be managed here that comes from around the world. A lot of the reasons for that I think are kind of historical, you know, we've got a commercial, open kind of approach to business generally in the UK. There's even geographical reasons if you think about the time zones.
It also helps that the UK more widely has got a, you know, across asset management, across banking, etc. It is a big financial centre across, you know, across the listed side as well. And that's got a kind of multiplier effect. And on top of all that, I think we've got a broadly sensible, not entirely sensible, because then I wouldn't really have a job in the kind of policy thing, but a largely sensible, fairly welcoming rules framework that's not too prescriptive, but remains, pretty robust. That's getting to the crux of it really. You need ‚ a robust, dependable, rules framework ‚to give confidence to global institutional capital that the UK is a safe place to invest really. It's that old adage about, capital flowing to where it feels‚ most, secure. So yeah, from a rules perspective, I think it's a mix of openness, flexibility, reliability, dependability and robustness, things like that.
Brandon (12:45)
And with that in mind, and as noted in the introduction, the latest Frontier Economics or their report explores the economic value of Guernsey specifically and its investment funds industry and the capital flows that the island delivers into the UK directly. So acting as a hub and a conduit to sort of support that. And the report found that Guernsey domiciled fund investment into the UK is growing at double the growth rate of the current UK FDI levels. So a staggering amount.
And it's also worth mentioning on a slightly separate point to that, that this is, you know, that 90 % of this, comes from Guernsey Domiciled funds, ‚ managed assets that are, as you say, are outsourced from outside the UK. This is sort of international capital coming into Guernsey and flowing solely into the UK, and supporting that sort of, strong FDI figures. How important are finance centres
particularly those that are members of the British family and so therefore largely Crown dependencies in ensuring sort of international capital continues to flow into the UK.
Tom Taylor BVCA (13:53)
Yeah, I think they're very important. And the role that centres like Guernsey, the Channel Islands in particular play really is to help grow and foster and support that foreign investment. I think you may just say then that the figures from the report, 90 % of Guernsey domiciled funds coming from non-UK investors, that kind of underlines, matches the point that I was making earlier about all that capital that the UK, system as a whole manages to kind of draw in from around the world. And Guernsey is able to play, an important role in that for similar reasons to the wider UK is good at this- strong, robust financial ecosystem, really deep bench of professional services, firms, lawyers and accountants. And Guernsey is really is known for that in the industry and around the world on that front, I'd say. It's also, you know, it's a small jurisdiction, so nimble, speed to market, etc., which can be, you know, more of a challenge in a kind of, you know, bigger jurisdictions, basically. So that can bring kind of cost efficiencies, I guess, for firms that, you know, that work in and with Guernsey. But I think, you know, again, the same point about kind of capital flow into where it feels more secure, the regulatory kind of credibility is critical to all that. And I think Guernsey really is, you know, this is demonstrated by the capital flows that are in the Frontier Economics report.
There are a lot of firms that do choose Guernsey. It's a serious option and it tends to be firms that have particular fundraising strategies because they see the attraction of having a Guernsey structure for certain types of, global, investors. So there's a speed thing, there's an investor preference angle to it as well and all that kind of supports the UK, supports the government's aims and growth ambitions and contributes to the of wider competitiveness of the UK in financial services, absolutely.
Brandon (16:20)
Yeah. And the report contains several case studies, exploring how private capital sort of channeled via Guernsey has and continues to sort of deliver value, whether that is into student accommodation in Durham, so in the northeast of England, or fibre optics infrastructure in Derry and Northern Ireland, or renewable infrastructure in Scotland and Wales. So the report contains a plethora of case studies.
I suppose, which of the case studies from the report stood out to you, you know, particularly with respect to sort of closing that sort of funding gap between regions that remains such a sort of, common issue.
Tom Taylor BVCA (16:57)
It was quite difficult. I was looking at this last night trying to pick one. It's quite difficult because there's quite a lot which underlines the- you can look at the kind of the numbers and the stats and the capital flows and stuff, but it really brings it to life when you look at the kind of case studies and the stories of how this private capital investment has actually helped a particular company to grow. It really brings it to life. But one that stood out for me was probably the investments by Gresham House. So that's a private capital firm that's actually owned by another private capital firm that's a BVCA member, so Searchlight Capital. Gresham House basically invests in companies that are trying to improve digital inclusion around the UK, so providing, high speed internet, fibre access, and particularly to parts of the UK that are underserved by the main broadband, operators. So that's particularly, I imagine, rural communities where there's less interest from some of the larger providers to offer services.
So Gresham House is invested in three companies that target different regions of the UK, trying to develop those kind of internet access and inclusion. That's in some of the kind of urban centers outside London, so Leeds and Manchester, but also more rural kind of isolated communities in Scotland and Cornwall. That's really, really important for the country and that underlines the role that the private capital has in distributing investment and economic growth right across the country, right across the UK, which is important for so many reasons. And I think it's fair to say that the Guernsey Funds play an important role in that. They already channel finance into all the different nations and regions of the UK and carry on doing that. Long may they continue doing that.
There's this case that is in the report of investment infrastructure, housing, green energy in Birmingham, Leeds, Manchester, Durham, Liverpool and other UK nations and regions. So lots of great examples and that's just one that jumped out to me.
Brandon (19:13)
Yeah, that's a great one. And that's a, yeah, it's a lovely story, I suppose, in terms of, like you say, bringing sort of bit colour to the, what can otherwise be quite a figure heavy report. So one that stood out to me was the renewable infrastructure group, limited company, supporting battery storage, sites across England and Scotland. So for listeners, the Guernsey domiciled investment fund here is actually investing in more than sort of 40 battery storage facilities right across the UK, such as the 89 megawatt capacity site in North Yorkshire, but also various offshore winds farms, including in Aberdeenshire in Scotland, and in Norfolk, which is obviously the east of England. So the fund is not only supporting investment into sort of renewable energy, but is creating jobs in this sort strategically important sector in Scotland and in the northeast and the east of England, so right across the country.
On that, the UK government has made several pledges regarding climate change. For example, I suppose the most famous one being the aim to reach net zero emission by 2050. How important is private capital like the type we've discussed in ensuring government can meet its aims on this policy issue?
Tom Taylor BVCA (20:34)
It is very important, probably critical. The first reason why it's very important, which is pretty indisputable, I think, is because of the sheer size and scale of the sector and its impact on the economy where emissions are being produced and need to be produced less. I'll just refer you back to those 13,000 companies, 2.5 million jobs, 7% of GDP. If this part of the business community in this part of the investment ecosystem doesn't play a role in net zero, then there'd be a gap. So there's the size and relevance point to begin with. But there are also a couple of specific reasons why private capital is important to the whole climate transition net zero puzzle that are linked to the nature of this type of investment activity.
The first is broadly what it invests in. So private capital invests in innovation of new things and growing those new ideas. So you picked out an example in your report of how some of the new ideas and innovations that are going to be needed to tackle climate change be it...
mitigation or adaptation. Those were new ideas and some examples of that in the report. So, clean tech, carbon capture, battery efficiency, systems for driving down emissions, and all the IP behind that, some of it is coming out of the UK universities. They're all part of finding solutions to deal with climate change and taking us on the net zero journey. So, that's the first piece, like what to invest in is the innovative solutions piece. And then the second part of reason why the nature of private capital means it has an important role is about how it achieves growth and returns from the types of company they invest in.
So when private capital firms buy a company, they're looking to hold on to it for ‚Åì five or six years. And during those five or six years, they have to. This is what they have to do in order for the business to work is make those companies grow and make them worth more at the end. And in the current world, you can't escape the fact that you have to improve the sustainability form and reduce the emissions, et cetera, of the companies that you are hoping to sell in a few years time to another investor that will be very much focused on those metrics alongside the financials when they're deciding whether or not to give you a good price for it. That's a very kind of fundamental part of how the industry works, which is completely aligned with the policy objective of achieving a net zero. So it's that driving down business emissions in normal, know, everyday companies, SMEs.
And the final piece, I guess, which is related to that is that 50 % of the emissions, the UK's business emissions are generated by SMEs, SMEs are from 90 % of private capital funds portfolios. So it's a really important nut to crack that SME emissions and private capital firms invest 90 % of the capital in SMEs and they're motivated by the model to drive the emissions down. So that really is a crucial part of the puzzle.
Brandon (24:08)
Absolutely. And that's fascinating. Another interesting case that I sort of highlighted as being of interest from the report is the Cibus Capital investment into the development of cutting-edge food tech. think, I believe Cibus are members of the BVCA as well, I think. And from its domicile in Guernsey, the fund is investing in sort of delivering tailored vitamin gummies, having already sold more than 53 million units.
And it's currently expanding into retailers and has been recognised on the Sunday Times 100 tech lists. It's based in Birmingham and the Midlands. And so it's creating jobs in that region and that part of the UK. What impact does private capital, it sort of, I guess, not to get granular, but be it PE or VC or a slightly different strain. What sort of impact does it have on helping scale innovation?
or I guess scale, innovative companies across regions that are outside of London?
Tom Taylor BVCA (25:11)
Yeah, thanks Brandon and thanks for highlighting that example. Another, as you say, BBC member firm doing great things and that's another one that we're proud of, as a you know, on behalf of the industry. And it's one that I like It's not quite the same, but kind of personal kind of connection to this. I've got a four year old who's got our feeds, which is a kind of, basically extremely fussy eating. So he only eats kind of pasta without olive oil and obviously ice cream. And so he has to eat, you know, vitamin gummies on a daily basis, otherwise he would kind of, you know, waste away.
So personally, that's one that I really like. And so, you know, on the serious note, private capital is all about, as I said before, growing companies by spurring innovations that drive growth over the longer term.
The typical fund investment five or six years and the returns are generated by generating the growth of the company. So the way that happens is firstly by obviously by the provision of capital, we kind of follow on capital that's you know, that's investment, the obvious piece, less well understood, I think, widely is the role that private capital firms play in terms of their active ownership of those portfolio companies that they've invested in.
So private capital firms, the investment professionals are experts in growing businesses. They've done it before. They've got the networks. They've got the expertise. So when their funds acquire the various ownership positions in these companies, that they use all their expertise and their experience to help develop the business plans and fine-tune the governance and incentive programs, which kind of gets everybody focused on achieving growth.
They professionalise the systems, they introduce sustainability processes. And you have to remember that these are quite young companies, typically. They're growing fast. And if they're going to kind of continue that growth trajectory, they need to build a kind of scalable platform for the future and private capital firms help them do that as well as providing the capital invested and grow. And as far as the nationwide footprint point goes, the private capital does that around the country basically.
And we said before that the UK is an international hub for private capital firms and that's very true, drawing a lot of capital from around the world that doesn't invest all of that capital in the UK, but it does have a huge domestic bias towards where it invests that capital. There's over 50 % of the billions that are raised by private capital firms every year, private capital firms in the UK every year is ultimately invested into growing UK companies. Remember, 90 % of those companies are SMEs.
And 60 % of that, give or take, is outside London. So, you we've spent, been spending a lot of time going and seeing private capital firms based around the country that you know, driving growth in that provision of capital and active ownership and manner, creating jobs and improving productivity around the country. So, yeah, it's a UK-wide industry, absolutely.
Brandon (28:42)
Fascinating. on that, I know we've talked quite extensively on that now, but typically there still remains that sort of tendency to see private capital as being something that delivers for the city of London, if not the city more specifically. But clearly the beneficiaries go far beyond, you know, the regional hubs, across England, but also all four nations are recipients of this.
We've already touched on investment into Scotland, the Northeast and the Midlands alone. So we can park that for a minute perhaps. But I guess more specifically, how can government and industry align to ensure that private capital can reach those traditionally underserved areas perhaps?
Tom Taylor BVCA (29:30)
Yeah, of course, just before I kind of launch into that, it's tempting to see the kind of nations and regions of the UK as, as you put, of recipients of the kind of beneficence of private capital investment. But that's not really how it works. It's very much a kind of partnership. So it's kind of top down and bottom up, if you like.
Brandon (29:46)
Mmm.
Tom Taylor BVCA (29:58)
you know, there's so much kind of entrepreneurial kind of energy around the country. There's the kind of IP coming out of universities. There's entrepreneurs in the nations and regions that are, you know, kind of hungry to grow their businesses and et cetera. And what this industry does is kind of connect that energy with both the capital and the expertise of people who've done it before and can kind of help
Brandon (30:14)
That's very true. Yeah.
Tom Taylor BVCA (30:25)
accelerate the ambitions of those really kind of driven people up down the country. So I'm not trying to pick you up on the word, but it's just an opportunity to make a point basically that it's a kind of partnership. yeah, the kind of how the alignment in government industry and spreading it around the country, that kind of thing.
Brandon (30:33)
Yeah, no, yes, yeah, certainly. But it's critical. Yeah, for sure. Yeah.
Quite right.
Tom Taylor BVCA (30:50)
I think that the government and the industry are increasingly aligning on this. We spend a lot of time at the BVCA going up and down the country, highlighting to the government, you know, this energy that I was talking about, and that there's loads of private capital firms that are located around the country in Manchester, in Durham, Sheffield, Leeds, Bristol, etc. And they invest around the country, as you can see from that stat that I used before, about 60 % of the investments being in companies that are HQed out outside London.
So there's loads of examples of national, regional economic impact, job creation, etc. And the Frontier Economics report, in fact, does, a pretty good job of pulling some of those out. But a key consideration in this whole, you know, how do you ensure that the whole country gets that manages to get connected kind of entrepreneurs with the capital and the expertise.
A key policy consideration in all that discussion at the moment is around UK pensions reform, particularly around, not entirely, but just to pull an area of that out, the pooling of the local government pension schemes which is going on at the moment, which is to kind of get scale, so it's easier to have sophisticated private markets investments programmes.
Now those local government pension schemes, there's 86 local authority funds around the country that are being pooled into six kind of, well, they're still existing, but pooling their resources and working together in six pools, they've got a keen interest in private capital from a return perspective, obviously, but also because of the impact that investment into the smaller...
regional private capital firms that I mentioned before, which then invest in local and regional smaller businesses, SMEs, down the country, because of the impact that all that has on the local economic growth and hubs and ecosystems around the country. So we think that the LGPS, and indeed I think the LGPS thinks that the LGPS has a large role to play there, and we're hopeful that the reforms that are being kind of going through at the moment will encourage more of that.
Brandon (33:10)
Yeah, and alignment with government objectives is important. But on a practical level, how do you see the industrial strategy being met Tom, particularly with regards to building more affordable homes, creating jobs in new and dynamic industries we've already touched on, on the gummies case study as one of many and so forth. How do you see that?
Tom Taylor BVCA (33:33)
So there's various kind of pieces to that, but there's always various pieces to a puzzle, but the various pieces to this puzzle as well. The obvious type of piece is capital and investment. So UK needs to keep attracting all that international capital. We've talked about that. But a big part of ensuring that that capital keeps flowing is that the government needs to work across all the different kind of...
policy frameworks to make the UK and the broader kind of British family as competitive as it can be. And in the private capital context, we think there are four broad areas that the government needs to focus on to achieve that. The first is supporting private capital firms to get access to capital. So if you can raise capital from the UK, from global investors, from EU investors, but also from UK investors who've been conspicuously absent from this story in the past 20 years or so. That's really important.
And there's a lot of work going on around the pensions piece and getting the UK pensions to invest more into these, you know, kind of productive assets companies, SME finance, et cetera. So that's the first thing.
Secondly, there's access to talent. So firms need to be able to hire the right people. So we need to make the UK needs to make it attractive for individuals to come to the UK and do private capital investment careers here that's kind of tax frameworks and visa, know, kind of visa systems to encourage, you know, talent from outside the UK to come and practice their trade here. That's both for the private capital firms themselves, but also for the entrepreneurs that are, you know, building their businesses on the ground and kind of bringing all that innovative energy. Third thing is the efficient competitive regulatory frameworks.
It makes it easy to actually run your business here. There are financial services, regulatory reform, for example, going on there. And then the third piece, the fourth piece, so access to capital, access to talent, easy to run your business here because you have a sensible business and regulatory framework. The fourth piece is then pipeline of investment opportunities in UK businesses. And there's a real role for the government in that piece because it's also attractive to locate a private capital firm here if you think there are lots of good things to invest in here, supporting innovation, R&D, real economy type stuff, defense investment procurement, and that's kind of where the industrial strategy largely kind of comes in.
Brandon (36:00)
And to switch gears slightly, last year, the BVCA and Public Firsts co-launched the investment commission, which identified that 178 billion pounds of private capital investment is ready and waiting to be unlocked. How can that investment align with the seven pillars identified by the Labour government to achieve growth and move forward together. I know you've talked about this, there's good alignment there, but how can that capital be unlocked further perhaps?
Tom Taylor BVCA (36:30)
Yeah, it's actually gone up to 190 plus billion in the kind of this year's figures off the dish dry powder that is kind of available to, you know, has been committed but not invested yet. So that's gone up. And also the number of industrial, industrial sector, industrial strategy sectors has gone up to eight. And now they've come with the defence piece as well. So there's a lot of natural alignment to be frank. If you look at the list, you've got
Brandon (36:37)
well.
Tom Taylor BVCA (36:59)
clean energy, digital and tech, advanced manufacturing, defence, professional business services, creative industries, FS, life sciences. These are all kind of areas of innovation in all sectors that private capital is kind of naturally gravitates towards and is very active in, particularly at the kind of earlier stage of growing new business ideas. So the government needs to design policies that encourage investment in those areas making the UK more competitive so that we can get UK based firms to invest as much of that 190 billion into the UK, into UK companies as possible because they don't have to invest it into UK companies.
They can invest it around Europe and around the world. So we need to maintain that 50 % or so domestic bias and increase it by, you know, helping to spur innovation across all of those sectors. We're really active as an association in all of them because we've got a good connection to the expertise because our members invest in companies in those sectors. So we're trying to work with the government and other stakeholders on across all those areas.
Brandon (38:09)
And returning to the Frontier Economics report, the headline figure that we haven't touched on is that Guernsey channels 58 billion pounds into the UK economy on an ongoing basis, primarily into UK businesses, but also, you know, sort of infrastructure, housing, clean energy, all the case study topics we've already touched on. Could you tell us about that relationship between Guernsey and the UK? You know, do you see the island as one of the tools in the British family toolbox?
Tom Taylor BVCA (38:36)
Well, well, yeah, yes, yes, definitely. I couldn't really argue otherwise, given the kind of the bare facts, really. I mean, it is one of the tools in the British Family Toolbox as the figures demonstrate. It's really been impressive how Guernsey has been innovating in new structures that can give investors confidence in investing in sustainable investments, for example, through the jurisdiction.
The great example is the Guernsey green fund that's aimed at reassuring investors that what is it being invested in is actually green. Yeah, I mean, all those things before the close relationship that I mentioned before, a close relationship with the UK, the speed to market, robust regulation, etc. They all underpin a kind of greater optionality that Guernsey brings to firms that based in the UK to design structures that work differently for different types of investor around the world. And it's that around the world piece that is key.
Brandon (39:46)
And just to end, with FDI falling into the UK year on year, how important are finance centres like Guernsey in ensuring that international capital continues to find its way into the UK and not sort of be captured by other economic blocs or other countries?
Tom Taylor BVCA (40:01)
Yeah, yeah, really important. I think we all need to work together to ensure that the UK and the British family remains a private capital hub well into the future. That's kind of, you know, the position that we've got in the moment, maintain and expand that in what you kind of rightly mention is a very competitive landscape. The reason that's important that we keep having this hub in the UK is essentially because of that domestic investment bias. It's a global industry but UK is a global hub for raising capital and that capital can be invested globally. Despite that 50 % gets invested in the UK. So more of this activity happening here within the British family, the more capital that will get invested into the real economy and that will support the government's really important for everybody, growth ambitions, across those eight sectors.
Brandon (40:55)
Well, that's all we have time for today. So thank you very much for joining us. Thank you.
Tom Taylor BVCA (41:00)
Pleasure, thanks for having me.
Brandon (41:02)
Thank you very much for joining us too. You can, and for listening, if you enjoyed this discussion, we have a backlog of interviews on the Guernsey finance podcast channel. you can check them out by searching, Guernsey finance on your preferred podcast platform. We also have links to the BVCA in our show notes. So check them out to hear more from them. To find out more about Guernsey and its specialist financial services sector, head over to our website, guernseyfinance.com.
We look forward to welcoming you back to the podcast soon, but until then it's goodbye from Guernsey.
