Taxpayers lose £400m as result of investment fund set up by Rishi Sunak

Report shows 334 companies backed by Future Fund, set up in May 2020 by then chancellor, have since gone under

UK taxpayers have lost £400m following the collapse of hundreds of startups backed by a heavily criticised Covid-era investment fund launched by Rishi Sunak when he was chancellor.

The Future Fund spent £1.14bn backing 1,190 companies, some of them of types not usually associated with government portfolios such as the sex party organiser Killing Kittens and the now defunct festival tickets business Pollen.

The fund also invested nearly £2m in companies linked to Sunak’s wife, Akshata Murty.

The Department for Business and Trade’s latest annual report shows that 334 companies backed by the Future Fund have since gone under, costing the taxpayer hundreds of millions of pounds.

The value of the fund tumbled to £609m as of March this year, the report shows. But the British Business Bank (BBB), which administered the scheme, clarified that the number was in fact higher, £736m, because of income and returns from the investments. Taxpayers have been left with a £400m loss since the scheme closed to new applications in 2021, the BBB said.

Sunak launched the Future Fund in May 2020 to help emerging businesses during the pandemic. Under the scheme, the BBB would lend firms between £125,000 and £5m, matching parallel investments from private investors, with the loans being converted into shares when the company next raised money from investors.

The scheme left the government with investments in companies including Secret Group, which runs the Secret Cinema series of immersive film events, Oneskee, a maker of ski suits, and Oto International, which makes the cannabis extract CBD oil.

The scheme required an instruction from ministers before its launch because it was not possible to determine that it would be value for money. Shortly after the launch, the BBB’s then chief executive, Keith Morgan, warned ministers that the scheme would mostly attract “second-tier” companies that could not attract investment from elsewhere and that achieving value for money for the taxpayer was “highly uncertain”.

The business department’s annual report shows that 3.9% of its investments – about 47 firms – were flagged for suspected fraud, amounting to £79.5m of the Future Fund’s total investment.

A British Business Bank spokesperson said it was “too early to give an indication of the overall Future Fund performance; however, due to the size of the portfolio and the commercial nature of the third-party investors, we expect it to track the market over time, albeit it was not set up and run as an actively managed fund”.

The Department for Business and Trade was contacted for comment.