The Government has announced its pension reforms with huge fanfare, suggesting that they could be a primary solution for the UK's chronic tech start-up funding problems. While I welcome the Government's focus on our start-up ecosystem, I'm inherently sceptical that the reforms will change much, if anything, at all.

At the heart of the reforms is the so-called 'Mansion House Compact', an agreement with some of the country's largest pension funds to invest 5 percent of their assets in unlisted equities, such as high-growth private businesses. The Government estimates that this could unlock up to £50 billion of investment capital by 2030, with the potential for more money from public sector pension pots in the future.

But, the devil is in the detail.

In most of the reporting of the reforms, we read that UK start-ups raised £24 billion of venture capital in 2022. Yet, this figure is deceptive. Last year's figure was suppressed by the global tech slowdown. In 2021, UK tech start-ups raised £31 billion, a figure that feels much more representative of our annual investment needs.

This higher figure is still misleading. It only represents what UK start-ups actually raised, and not what they needed. When you look at the funding environment in the US, you see how far we are falling behind. A study from Oxford's Said Business School in 2016 found that the average early-stage company raised just £1 million in the UK versus £3 million in the US. The funding gap was even starker for later-stage businesses, with these start-ups raising an average of £2 million in the UK versus £6.5 million in the US.

Against that background, the Government unlocking £50 billion over seven years sounds like a drop in the ocean. I don't want to be unfair. Of course, £7 billion per year is a significant figure and it provides well-needed capital, but we need to be careful of overegging the pudding. If our goal is to make the UK one of the best places to found and scale a start-up, then this amount of money will only make a modest difference.

There are added complications. Firstly, it'll take a while for this capital to filter down to where it is needed. Many of the UK's pension funds do not have established teams for identifying and analysing unlisted investments, or, at least, not at the scale needed. As a result, it could take a year or even longer for these investments to start to take place. Yet, there are many scale-ups in the UK who are desperate for capital right now. They do not have the luxury of waiting months, let alone years.

But, perhaps more importantly, the scheme does not specify that UK pension funds must invest in UK start-ups. In fact, the compact specifies it is sufficient to invest in any unlisted high-growth businesses, regardless of where they are headquartered, to meet the 5 percent target. I cannot help but think we will wake up in 2030 and find that our pension funds have been piling into late-stage Silicon Valley-based start-ups that are already flush with cash – rather than filling the funding gap down the street.

And, I think this gets to the ultimate heart of the problem: in the UK, our investors – whether its retail investors, banks, pension funds, or corporate venture capital – are just much too risk averse, and they do not seem interested nor willing to throw their lot in with UK start-ups. UK pension funds are a good example: they invest just 0.5 percent of funds in unlisted equities – whereas, according to Preqin data, US pension funds make up 26 percent of firms investing in early-stage funds in North America.

But, forcing UK pension funds to increase the proportion of their investments in start-ups without changing this underlying investment culture will, I believe, lead to a situation where pension funds find clever, technical ways to satisfy the compact's new 5 percent target, without actually satisfying the spirit of the rule.

The result: a pile-in to late-stage, comparatively safer non-tech private investments, principally in the USA, where these start-ups have already raised hundreds of millions of capital. This will, once again, leave UK tech start-ups out in the cold.

So, what's the solution? I don't think there's a simple answer to that, but it must solve the problem at source: our country's cultural aversion to backing entrepreneurs and early-stage businesses. Part of the solution probably involves recruiting more Americans into our banking, wealth management, and VC investment ecosystem.

Part of the solution probably involves being more welcoming of high-net-worth individuals in the UK, who are usually more open to taking a run at risky investments. Part of the solution probably involves shaking up the City of London with new radical regulatory and structural reforms, like the so-called ‘Big Bang’ in the 1980s.

Ultimately, we cannot wallpaper over cultural issues. So, kudos to the Government for these reforms, but let's not pretend that these marginal, incremental improvements will change deep-seated cultural challenges. We need something much bigger for that, and we need to be alert to the risk of these smaller amendments distracting us from the bigger, wholesale, and radical change that is truly needed.

Jordan Greenaway is Commercial Director of PR agency Profile, which specialises in profiling entrepreneurs and executives