London launches £70m fund to back startups struggling to raise investment

The Mayor of London and the British Business Bank have introduced a £70 million fund called the Future London Growth Fund to assist rapidly expanding businesses facing difficulties in obtaining financing from traditional lenders. Managed by investment firm FSE Group, the fund will provide loans ranging from £1 million to £3 million to companies across London's 32 boroughs and the City.

Introduced on Thursday, the fund aims to address the financing gap between conventional bank lending and larger venture debt deals, targeting businesses with robust growth potential that may not yet be profitable. Backed by cornerstone commitments from the British Business Bank, contributing £20 million, and Funding London, the Mayor's investment arm, the launch of the fund comes as British businesses confront growing challenges in accessing capital.

Founders have warned that funding shortages are compelling promising companies to relocate overseas. Despite London's reputation as a global financial hub, numerous smaller enterprises continue to struggle in securing growth funding. According to research from the British Business Bank, only 71% of London's business owners reported profitability compared to 84% nationwide.

Mayor Sadiq Khan emphasized that London remains the premier city for starting and growing businesses, but many still face overlooked opportunities by traditional financial institutions. The Future London Growth Fund directly targets this funding gap, offering vital support to businesses seeking to scale up. The scheme precedes the upcoming Autumn Budget, with business leaders advocating for enhanced investment incentives and improved access to finance.

Earlier this year, major UK pension providers pledged to explore a £1 billion plus Scale-Up Fund aimed at directing more domestic capital into rapidly growing British science and technology companies. However, concerns persist that traditional lenders are failing to adequately support businesses caught between early-stage funding and larger institutional investment.

Kala Desai, head of the new fund, highlighted that while London boasts a thriving startup ecosystem, persistent barriers to growth still exist. "London is home to an exceptional community of high-growth, innovative businesses, yet many still hit a barrier when accessing scale-up capital," she noted. FSE, which oversees nearly £460 million in funds, has previously supported over 1,000 growing businesses across sectors such as technology, clean energy, and advanced manufacturing.