Government pledges to boost investment and cut red tape for UK scaleups

The government has announced a growth package designed to keep high-growth companies scaling in the UK rather than selling early or relocating.

The package includes significant investments made by the British Business Bank, alongside a pledge to cut red tape and modernise regulation.

A long-running lack of growth-stage funding in the UK has meant that many promising startups are pushed to source investment overseas, or fully relocate abroad once they hit a certain size.

In the past year alone, several high-profile British businesses, including Deliveroo and Runna, have been snapped up by US rivals.

While these deals can be lucrative for founders, they also point to a deeper issue: the UK still struggles to support homegrown companies through the scaleup stage. The new growth package aims to address this.

A bigger investment in British scaleups

A headline measure of the package is a £25m investment into Kraken Technologies, the largest-ever direct investment made by the British Business Bank into a single private company.

Kraken is an AI-powered spinoff company of Octopus Energy, which serves 70 million customer accounts globally and has a potential future London IPO, making it exactly the kind of company the government wants to champion. 

An additional £100m has been invested by the bank into life sciences and deep tech funds Epidarex Capital and IQ Capital. These are major high-growth sectors which often struggle to raise late-stage funding in the UK.

Commenting on the investment, Business Secretary Peter Kyle said: “For too long, Britain’s most promising companies have had to look abroad for the backing they need to grow.

“Scale-ups that should have become homegrown champions struggle against a system that is too slow and too fragmented. This package changes that.”

Cutting red tape to help companies scale faster

In addition to funding, the government is also seeking to cut the red tape that might prevent company growth. To do so, it will launch multiple reviews to simplify regulation and reduce administrative costs by 25%.

The focus is on removing friction at the scaleup stage, when business growth can be hindered by the weight of complex paperwork, slower processes, and rising compliance costs. 

For example, the government plans to modernise corporate reporting and competition rules, making it quicker and cheaper for growing companies to meet their obligations and figure out regulatory processes.

Industry groups have welcomed the move, with Jordan Cummins from the CBI commenting: “Cutting red tape and helping businesses scaleup is central to our collective growth mission.

“This latest package from the government is therefore a good step on the journey to helping the growing firms of today become the global leaders of tomorrow.”

What this means for UK startups

For UK founders looking to scale, this package is a positive step. There appears to be more attention from the government on funnelling growth-stage capital into the UK market, particularly for the tech, energy, climate, and life sciences sectors. 

Importantly, the package validates a long-standing frustration among startups that red tape and sluggish regulatory processes can actively hold back growth. By pledging to ease this problem, the government seems to recognise why so many promising companies fail to reach their full potential in the UK.

Many of the changes will take some time to be felt by startups, but it does mark a positive shift in tone. If this shift translates to a genuinely wider availability of capital and fewer barriers to growth, this could be a real turning point for the UK startup scene.