UK offers pandemic package to back innovation

A £1.25 billion coronavirus package to protect firms driving innovation across the country was unveiled on Monday by the UK government.

David Sapsted

20 April 2020

The main aim is to underwrite the future of SMEs involved in research and development in such areas as life sciences and artificial intelligence.Announcing the package, HM Treasury said it would comprise a £500 million investment fund for high-growth companies impacted by the crisis, made up of funding from government and the private sector. SMEs focusing on R&D will also benefit from £750 million of grants and loans.Delivered in partnership with the British Business Bank and launching in May, the fund will provide UK-based companies with between £125,000 and £5 million from the government, with private investors at least matching the government commitment.These loans will convert to equity if not repaid. To be eligible, a business must be an unlisted UK registered company that has previously raised at least £250,000 in equity investment from third party investors in the past five years.
The government is committing an initial £250 million in funding towards the scheme, whose first stage will be open until the end of September. The scale of the fund will be kept under review.Chancellor of the Exchequer Rishi Sunak, said: "Britain is a global leader when it comes to innovation. Our start-ups and businesses driving research and development are one of our great economic strengths, and will help power our growth out of the coronavirus crisis."This new, world-leading fund will mean they can access the capital they need at this difficult time, ensuring dynamic, fast-growing firms across all sectors will be able to continue to create new ideas and spread prosperity."Mike Cherry, national chairman of the Federation of Small Businesses, welcomed the announcement saying the fund represented a vital cashflow boost for many smaller businesses at the forefront of technological development and innovation.“This is an investment in transforming our futures, as these SMEs focus on research and development in key areas such as life sciences, artificial intelligence, big data and clean energy,” he said.Anneliese Dodds, the Labour Party's shadow chancellor, said: “We have expressed major concerns about the ability of start-ups and innovate firms to weather the current crisis, not least because many fail to benefit sufficiently from existing programmes to stay afloat.“While welcome, the devil will be in the detail of how firms can qualify for this funding and how long it will take to arrive.“Given the very low rate of acceptance of applications for the small business loan programme, and the pressing and current time pressures facing many firms, this funding must be available quickly and with a minimum of paperwork if we are to prevent even more firms going bust.”Fears that government support for businesses has not been delivered fast enough were also expressed by Adam Marshall, director-general of the British Chambers of Commerce.Interviewed on Sky News, Mr Marshall said the human as well as economic cost would be large "if we don’t see support moving more quickly” to companies struggling because of the effects of the pandemic.“We’ve found that about 60 per cent of companies have less than three months’ cash in reserve, many who have seen their revenues fall off a cliff over the past month or so, and many of them are taking some really big life or death decisions as businesses," he said.“So the support getting to the frontline over the next few days is going to be absolutely critical. Right now it is taking too long for a lot of the support to reach the frontline.“When you’ve got 30,000 applications for loans and 300,000 expressions of interest, 6,000 (approvals for loans) isn’t an adequate figure and we’ve really got to see the banks and the government working together to speed up the process so that as many businesses as possible can get access to those loans."