ALEX BRUMMER: Battle to unlock funds to back UK science and tech

Jeremy Hunt has quite a task ahead in next week’s Budget.

The Chancellor plans to lift the spirits with high-flown rhetoric about Britain’s world-leading achievements in life sciences, deep technology, AI, fintech and much else.

He will do so against the tormented backdrop of Arm, business lender OakNorth and troubled data group Wandisco deciding the grass is greener on the other side of the Atlantic.

Challenge: Chancellor Jeremy Hunt plans to lift the spirits with high-flown rhetoric about Britain’s world-leading achievements in life sciences, deep technology, AI and much else

This is just the tip of an iceberg. As we learnt in the pandemic (with no exaggeration). Britain is genuinely a world beater when it comes to biotech, developing vaccines and new medicines.

Many UK discoveries turn into start-ups and then race towards Stage One approval in the regulatory process. That indicates a prospect of success.

Then the fun begins with small biotechs looking for direct finance and big pharma seeking licencing deals to capture the new treatments or compounds.

Realistically, this is a hit-or-miss process with only a one-in-ten chance of success.

Nevertheless, the competition is hot and as one biotech lawyer told me this week, at this point, you can almost hear the whoosh of great science, developed in UK universities, heading to Stanford and the US West Coast.

American venture capital is so much more willing to take the risks than British funders. This is a huge pity because as vaccine hero Kate Bingham has noted, the NHS could be a fantastic testbed for genetic treatments, digitalisation, AI and much else.

Many of our better-known growth companies have been spin-outs from the universities with Arm, Aveva, Darktrace and Oxford Nanopore among them.

It is jolly good that HM Treasury recognises this and the Chancellor has set up a task force to identify ‘best practice’ in turning university research into commercial success. 

This looks to be typical Whitehall, with civil servants, as Bingham has observed, focused on process rather than outcomes. 

Of course, there is huge room to turn university research into a greater commercial success. 

This stuff is already going on with Russell Group universities such as Southampton. It has created an enormous science hub where dozens of innovations have been turned into firms.

M&G is seeking to be a pioneer in this space through Northern Gritstone. Its £5bn Catalyst Fund is being opened to external investors for the first time and is hungry for investment targets.

Tory voices, such as Lord Leigh of Cavendish Corporate Finance, argue if the UK really is to become a beacon for start-up funding, then mechanisms such as the tax-advantaged Enterprise Investment Scheme need to be modernised and extended.

The Government still lives in fear of fiscal turbulence after the Truss fiasco last autumn. 

But the UK cannot recover its mojo without generous tax breaks and a change in attitude among defensive domestic investors to more venture capital. Leaving it to the Americans should not be an option.

Suisse watch

US regulators are never slow to punish overseas banks. Both HSBC and Standard Chartered have in the past been penalised for money-laundering and sanctions busting. 

Problems at Credit Suisse are of a different kind. The Securities & Exchange Commission unusually has intervened to prevent publication of the troubled bank’s report and accounts.

It doesn’t trust cash flow numbers for 2019 and 2020. 

The net effect of the mistakes may not be material but queries from the US’s top Wall Street regulator are not a good look.

Earlier this week, the bank’s biggest investor, Harris Associates, sold its stake and the shares tumbled another 5 per cent in latest trading. 

The goal at the Swiss bank is to stem the outflows and focus on its wealth management skills. Latest events can hardly be classed as confidence building.

Survival skills

Nothing is more important to Jamie Dimon and JP Morgan than the Wall Street lenders ‘white-shoe’ reputation.

In turning the tables on former Barclays chief executive Jes Staley over his links to sex offender Jeffrey Epstein, it clearly has decided that some allegations and testimony released, as a result of court actions, is too toxic to be left hanging.

Not for nothing has Dimon survived at the apex of JP Morgan since 2005, a period encompassing the great financial crisis.