British startups should be kept on home soil, says top bank boss, claiming U.S. buyers are getting all the glory with none of the risk

Britain has long been recognized as one of the world’s key financial hubs. But in recent years, it’s witnessed a slew of homegrown companies shift their headquarters to the U.S. or list in American stock markets in the hopes of attracting global attention.

However that’s left the U.K. to carry all the risks of backing startups while its peer across the Atlantic reaps the benefits, according to the boss of the major state-owned British Business Bank (BBB).

“We’re developing these companies, and then they’re being acquired either … by corporates—often U.S. corporates, but not exclusively—or they’re being acquired by U.S. investors, who then re-domicile the business,” Stephen Welton, chair of the economic development bank told the Financial Times in an interview published Thursday. He assumed the role in October after a career in scaling up companies and investing in British business.

“We don’t want to be an incubator economy taking all the risk of these very, very tiny companies, and then not able to capitalize on that by following through with the scale-up capital to turn some of those into true global companies,” Welton said.

Britain’s challenges

Not too long ago the U.K. was clocking in major gains in tech listings, showing great promise. But even as it’s risen to be a leader in Europe, Britain has been trailing behind the U.S. when it comes to venture capital funding.

“The funding gap between the U.K. and U.S. is primarily driven by varying levels of funding going into research-and-development-intensive sectors—largely deep-tech and life sciences—with the U.K. having a lower deal and investment share going to this sector,” a BBB spokesperson told Fortune. “The U.S. provides a useful benchmark for the U.K. to aspire to as its VC ecosystem is the largest and most developed globally.”

Amid a global slowdown impacting several industries including tech, the U.K.’s VC ecosystem has struggled to maintain its allure. In public markets, U.K.-founded companies such as chipmaker Arm and construction materials company CRH have moved to the U.S. citing growth opportunities and higher valuations.

“The U.K. is very well-placed to start companies and to spin them out of universities and to give them that first leg on the ladder,” Welton told the FT. He added that “we’re not nearly as successful when it gets to the next two or three legs of the ladder where the U.S. predominates,” but that challenge isn’t specific to Britain alone.

In the past decade, nearly 5,000 high-growth U.K. companies have been sold to conglomerates like French pharma group Sanofi, the FT reported, citing data from Beauhurst.

Britain’s market for smaller-size stocks has also been shrinking, raising concerns about London slipping below its competitors as a financial center. In a June report, advocacy group TechUK referred to the U.K.’s economy for startups as one that’s “broken” and in need of fixing if the country hopes to be one among global players.

Welton also highlighted how it can be “way too complicated” for small companies to raise funds, and how they are often struggling to find the resources best suited for them.

Opening up new funding doors

Despite structural challenges, the U.K. remains one of the financial epicenters globally. Its strong suit especially lies in scaling tech ranging from life sciences to fintech and AI, the BBB spokesperson said.

The BBB wants to back “the big, significant companies of tomorrow,” Welton said.

For its part, the British government is trying to make private capital more accessible in the venture capital realm. In November, finance minister Jeremy Hunt laid out plans to expand pension schemes that can invest in U.K. startups. This could potentially open up £75 billion ($96 billion) in financing for high-growth firms by 2030 while also boosting pensioners’ returns.

The BBB is set to work on the so-called Mansion House Compact initiatives set out by Hunt through a growth fund that will provide additional support to private pension funds. The investment vehicle will “utilize the bank’s market access and position as the largest domestic investor in U.K. venture capital,” BBB’s spokesperson said. An additional £50 million will also be pumped into BBB’s “Future Fund: Breakthrough” that invests in innovative U.K. companies.

These measures are ultimately aimed at building a robust pipeline of companies that could potentially list in the London Stock Exchange and bolster Britain’s global competitiveness.

This story was originally featured on Fortune.com