The other night I had a thoroughly enjoyable drink with an old friend. Let’s call him James, which is not his real name. James is very familiar with both ClearlySo and impact investment, but has spent most of last year working in India.

We eventually came onto the subject of impact investment more generally. James had been working on quite a few investment transactions whilst in India and was positively raving about some of the innovations he has encountered. When I asked him to compare Indian developments with those in the UK he became quite animated and said, “The problem with the UK is that professionals in this market have become bloody arrogant.”  He felt it could put the UK’s purported leadership at risk.

James noted how many of the Brits he met in India (James himself is British) were so full of themselves and their “leadership position” that they were unwilling to learn lessons from some of the very interesting experiments underway elsewhere. James went on to suspect that this was probably happening with regard to other markets as well. His contention was that British impact investment experts were so busy flying all over the world to lecture others about “how wonderfully we do it in the UK” that the British impact investment glitterati were not doing enough learning and listening.

This conversation made me rather uncomfortable. I myself have boasted about UK leadership, which seems to be in our commercial interest (I also think it is true). For decades, the UK has seemed a thought leader, and has developed some exciting models, practices and instruments. In addition, the advent of Big Society Capital (BSC), the first of its kind anywhere to bring substantial funding (£600 million) into the marketplace has been extremely catalytic. In addition, this Conservative Government and its predecessors have thrown substantial resources into impact investment. Tax credits, conferences, new legal structures and a host of subsidies have come rapidly. This creates at least two risks.

First, it has in some ways created a rather comfortable bubble of sorts in the UK market. The influx of funding from BSC hyper-charges the market; encouraging entry by non-UK players and discouraging involvement by UK parties in other markets. The sense that things are happening creates encouragement and goodwill domestically, but very little incentive to get involved in and learn from experiments elsewhere. I have previously commented elsewhere on the surprising lack of meaningful involvement by large UK banks and insurance companies in impact investing compared with those in Europe. Also, experiments like the “90-10 funds” in France are instructive.

This bubble also runs the risk of encouraging artificial behaviour in the UK. Some of this was evident in the government funded Investment and Contract Readiness Fund,  where entrepreneurs in certain instances cheekily saw the subsidy as a way to generate a bit of extra income instead of paying advisers for contract and investment readiness, which was the main intention of the programme. Also the availability of funding from BSC has indeed catalysed the market but runs the risk of getting entrepreneurs too comfortable with sub-market rate capital.  Also, because of legislated restrictions on BSC investments the market might be skewed to favour those impact investment opportunities which meet BSC’s criteria as opposed to those with a greater “profit with purpose” orientation.

On balance, James and I agreed that the UK still had many positive things going for it and that the creativity which exists should continue to hold in a relatively good stead. However arrogance is a risk of which all “global leaders” need to be mindful.

First published in Third Sector in January 2016.