UK Trends and Developments Contributed by: Dylan Doran Kennett, Michael Jacobs, Stephen Newby and Mark Ife, Herbert Smith Freehills LLP
an independent review of university spin-out companies. The purpose of the review was to identify best practices in turning university research into commercial success. The report welcomed ongoing reforms to support scale-up capital, such as changes to pensions regulation and encouraging the government to accelerate these efforts and reforms affecting UK capital markets. The UK government accepted all the recommendations from the review and recog - nised the important role university spin-outs play in the UK’s innovative investment economy. According to Beauhurst, the average equity stake taken by universities in 2023 was 22%, which many founders and investors argue is too high and stifles growth potential. This sentiment is echoed in the “Reviving UK Investment Flows” report, published by New Capital Consensus, an independent policy institute that focuses on rethinking the UK investment system to bet - ter connect capital to long-term, productive uses. The report highlights the need for a more streamlined and supportive structure to foster innovation and entrepreneurship. The report also encourages pension funds to invest more in high-growth companies, recognising the need for higher returns and diversification. By steering investments towards riskier, alternative assets like private equity and venture capital, pension funds can support innovative enterprises and contribute to economic growth. However, there are signs of improvement. The Times reported in March 2025 that the average stake taken by universities in tech spin-outs dropped to 16.1%, a ten-year low, according to a Beauhurst study commissioned by the Royal Academy of Engineering. Similar to its predecessor, the current UK gov - ernment continues to emphasise its commitment
to supporting university spin-outs and unlocking further funding. In its manifesto released in June 2024, Labour pledged to “work with universities to support spin-outs” . Bipartisan support for uni - versity spin-outs in the UK is a promising pros - pect for founders and investors. As of January 2024, 56.7% of active university spin-outs were at the seed stage, according to Beauhurst, indi - cating strong growth potential for innovation within the UK. Research from Sifted showed that 40% of the ten fastest-growing university spin-outs in Europe in 2024 were from UK institutions. In addition, the recent revival of the Oxford-Cambridge Arc, a railway line connecting Oxford and Cambridge, is expected to unlock significant innovation and further university spin-outs. Improved connectiv - ity will facilitate collaboration, attract investment and drive long-term economic growth, making it easier for talent and businesses to thrive in these regions. Mansion House reforms In his Mansion House speech in July 2023, then Chancellor Jeremy Hunt introduced propos - als to reform the UK’s pensions sector, aimed at “boosting returns and improving outcomes for pension fundholders whilst increasing fund- ing liquidity for high-growth companies” . The proposals were confirmed and progressed in a comprehensive package of reforms released in the UK government’s Autumn Statement in November 2023 and have been built upon by the current government. These reforms are predicted to unlock more than GBP80 billion of financing for unlisted equity investment, with some of the most significant reforms pertaining to venture capital investment, including the following.
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