Background
The Future Fund, launched in May 2020 by the UK government and delivered by the British Business Bank, was designed as an emergency intervention to support potentially viable UK-based companies struggling to raise equity finance during the COVID-19 pandemic.
- The fund provided £1.14 billion of matched funding to 1190 companies through convertible loan agreements (CLA), requiring equal investment from private investors.
- Individual companies could access £125,000–£5 million, with the scheme closing to new applications in January 2021.
The fund’s primary objectives were to:
- Stabilise early stage, high-growth firms during the crisis
- Preserve the UK’s equity-backed pipeline of innovative companies
- Mobilise private investment alongside government funding
- Ensure funding was used for intended business purposes.
Fortia Insight (previously part of RSM UK Consulting LLP) was commissioned to deliver the three-year independent evaluation, assessing process, impact and early value for money signals.
Methodology
The Year 3 evaluation built on methodologies developed in Years 1 and 2, providing a more holistic economic impact assessment.
- Mixed-method approach: Surveys (across funded firms and investors), qualitative interviews (with recipients, counterfactuals, lead investors, government stakeholders, delivery partners and insolvency practitioners dealing with liquidated firms) and secondary data analysis (Beauhurst, Inter-Departmental Business Register, Companies House and HMRC tax records) were conducted.
- Econometric counterfactual analysis: Enhanced matching techniques compared Future Fund firms to a robust control group of equity-backed peers, assessing turnover, employment, fundraising and survival outcomes.
- Benchmarking: We compared portfolio firms against broader innovative UK businesses to contextualise outcomes in the wider equity ecosystem.
- Outlier analysis: We investigated high-growth ‘winners’ and liquidated firms to understand extremes that drive long-term portfolio performance.
- Triangulation: We combined quantitative KPIs with qualitative evidence on business behaviour, investor confidence and governance.
Contribution and legacy
- Stabilisation role: The fund acted as a financial bridge, sustaining high-growth firms through the pandemic.
- Policy learning: The fund established evidence and frameworks for future downturn interventions, including balancing speed of deployment with governance safeguards.
- Future value for money: The evaluation set a foundation for long-term cost-effectiveness and return on investment analysis once portfolio outcomes crystallise.
Challenges
- Data limitations: Long-term impacts are not yet observable, given the early stage nature of equity investments.
- CLA complexity: Some firms misunderstood repayment or conversion terms, contributing to insolvency risk.
- Stakeholder engagement: Balancing perspectives from government, investors and firms was required to capture the fund’s nuanced impacts.
- Market volatility: Inflation, higher interest rates and cooling venture markets complicated attribution of outcomes to the fund alone.
- Early value for money assessment: A full value for money analysis is premature; early indicators and frameworks were established instead.
Impacts
Key findings from Year 3
- Business survival: 70% of surveyed recipients said they would have closed within 12–36 months without the fund. Survival rates by 2024 were slightly lower among portfolio firms (75%) than counterfactuals (80%), reflecting CLA-triggered liquidations.
- Catalyst for investment: Nearly 50% of recipients secured follow-on private capital (venture capital, private equity or angel investors), often combining the fund with R&D tax relief. Evidence shows the fund complemented rather than crowded out private investment.
- Growth and performance:
- Portfolio firms reported stronger turnover growth (22.5% in 2023 and 21.5% in 2024 vs. 13.1% and -7.5% for counterfactuals).
- Employment outcomes lagged, with portfolio firms prioritising scaling and R&D over job creation.
- Outlier firms – mainly in IT and software – grew eight times faster than counterfactual peers, reflecting concentrated portfolio returns.
- Governance and adaptability: Programme delivery improved over time (extended loan terms and clearer guidance), though structural complexity remained a barrier for some firms.
- Equity ecosystem impact: The fund helped preserve the UK’s innovation pipeline during a period of market failure, giving investors confidence and preventing a ‘lost cohort’ of start-ups.