New £1 Billion UK Scale Up Fund! Railpen and Nest Open Talks With British Business Bank

Shawn Jhanji

Jul 28

6 min read

Updated: 6 days ago

Illustration for the proposed £1 billion UK Scale Up Fund backed by Railpen and Nest

Ask a UK founder why the biggest cheques in a later funding round tend to come from Boston or San Francisco rather than London, and the honest answer usually comes back to where the money sits. A proposal now on the table from two of Britain's largest pension providers is aimed directly at that problem.

Railpen and Nest, working alongside the British Business Bank, are in talks to launch a new £1 billion investment vehicle dedicated to backing British tech scaleups, according to Sifted. The proposed UK Scale Up Fund would be a first of its kind vehicle designed to help homegrown startups commercialise, expand internationally and create jobs, funded by the retirement savings of millions of UK workers.

The timing is pointed. The talks were announced just weeks after Sifted revealed that France was seeking to block UK participation in the EU's own €5 billion Scaleup Europe Fund, a move that cast doubt over British startups' access to one of the continent's biggest emerging pools of late stage capital. A domestic alternative, even a modest one relative to the scale of UK pension assets, gives homegrown scaleups a fallback that does not depend on goodwill from Brussels or Paris.

In a statement released on Monday, Prime Minister Andy Burnham described the proposal as a vote of confidence in British business, British talent and British ambition.

He said the fund would help unlock good growth in every postcode, connecting pension investment with the entrepreneurs and technologies that will reindustrialise Britain and create the jobs of the future.

Railpen chief executive Andy Bord said the fund's priority is always to deliver strong long term outcomes for members, adding that the UK Scale Up Fund represents a compelling investment opportunity where disciplined, patient capital can help growing companies scale. Nest chief executive Ian Cornelius said there is an important role for pension capital in helping successful UK businesses access the funding they need to grow.

The proposal follows years of debate over Britain's shortage of domestic growth capital.

The UK has one of the world's largest venture capital markets by deal volume, yet many of its most successful startups still depend on foreign investors once they reach later, capital intensive stages of growth. Founders, investors and policymakers have repeatedly called for UK pension funds, which collectively manage well over a trillion pounds, to play a larger role in backing the companies growing in their own back yard.

That call has so far produced modest results. Analysis published this month by Startup Coalition found that UK pension default funds had invested just 0.6 per cent of assets in private markets under the Mansion House Accord, the voluntary commitment struck by 17 of Britain's largest workplace pension providers to put 10 per cent of default funds into private markets, including venture capital, by 2030. A dedicated, purpose built vehicle such as the proposed UK Scale Up Fund sidesteps some of the governance and liquidity objections that have slowed pension providers' broader private markets commitments, since it is designed from the outset around long duration, growth stage investment rather than retrofitted onto funds built for daily traded assets.

For founders, the practical impact will depend on details that have not yet been made public: cheque sizes, sector focus, governance, and how quickly committed capital actually reaches operating companies rather than sitting in the fund structure. The proposal is, for now, a set of talks rather than a live fund. But it lands as one of the clearest signals yet that Britain's pension providers see scaleup finance as a strategic priority rather than a niche allocation, and as a direct answer to the anxiety that UK founders' growth capital increasingly originates overseas.

Key Takeaways

Railpen and Nest are in talks with the British Business Bank on a new £1 billion UK Scale Up Fund dedicated to domestic tech scaleups.
The proposal follows France's attempt to block UK participation in the EU's own €5 billion Scaleup Europe Fund.
It responds to years of pressure for UK pension capital to back domestic growth stage companies, an area where the Mansion House Accord has so far delivered limited results, with just 0.6 per cent of default fund assets in private markets.
The fund remains a proposal rather than a launched vehicle. Cheque sizes, sector focus, governance and access criteria have not yet been disclosed.
For founders, it signals a potential new pool of patient, UK based late stage capital, though the timeline for when committed capital would actually reach operating companies is still unclear.

Who is in the consortium

The government announcement on 27 July 2026 named five pension providers, not two. Alongside Railpen and Nest, the group includes LPPI, LGPS Central and Border to Coast, three of the pools that manage Local Government Pension Scheme money. Between them they span defined contribution, defined benefit and local government schemes. Nest alone has more than 14 million members, and Railpen manages around £34 billion for the railways pension scheme.

The British Business Bank is working with the group to support the launch and intends to invest alongside it, while the Office for Investment is supporting the consortium as it explores the vehicle. The stated focus is scaling UK science and technology companies. Earlier in July, Nest had separately said it intended to allocate up to £1 billion to venture capital through Schroders Capital.

What happens next

The consortium has committed to explore the fund, not to launch it. The next step is a market engagement process, run with the British Business Bank, to appoint a manager. Sky News later reported that M&G Investments and Schroders had applied to run the fund, and further reports said London-listed Molten Ventures had joined the race. No selection date, first close or investment criteria have been published.

What it means for UK founders

The choice of manager will shape who benefits. A large asset manager is likely to write bigger cheques into fewer, later-stage companies, while a venture specialist may back funds or companies at Series A and B. Founders planning a growth round in 2027 or later should watch for the appointment and the published mandate rather than assume the money will be available directly. The British Business Bank's existing programmes, such as British Patient Capital, remain the more immediate route to institutional growth capital.

Key facts at a glance

Announced: 27 July 2026, as a proposed fund of over £1 billion.
Consortium: Railpen, Nest, LPPI, LGPS Central and Border to Coast.
Public partners: British Business Bank and the Office for Investment.
Focus: scaling UK science and technology companies.
Status: manager search under way, with M&G and Schroders reported as applicants.

Sources

Frequently asked questions

What is the proposed £1 billion UK Scale Up Fund?

The UK Scale Up Fund is a proposed £1 billion investment vehicle dedicated to backing British tech scaleups. It would be funded by the retirement savings of millions of UK workers and is designed to help homegrown startups commercialise, expand internationally and create jobs.

Who is behind the UK Scale Up Fund talks?

The pension providers Railpen and Nest are in talks to launch the fund, working alongside the British Business Bank, according to Sifted.

How does the UK Scale Up Fund relate to the EU Scaleup Europe Fund?

The talks were announced weeks after Sifted reported that France was seeking to block UK participation in the EU's €5 billion Scaleup Europe Fund. A domestic fund would give UK scaleups a fallback that does not depend on access to the EU vehicle.

How much have UK pension default funds invested in private markets under the Mansion House Accord?

Startup Coalition analysis found UK pension default funds had invested just 0.6 per cent of assets in private markets. Under the Mansion House Accord, 17 of Britain's largest workplace pension providers committed to put 10 per cent of default funds into private markets, including venture capital, by 2030.

Is the UK Scale Up Fund open to founders yet?

No. The fund is still a proposal under discussion rather than a launched vehicle, and cheque sizes, sector focus, governance and access criteria have not yet been disclosed.