The initiative will help R&D-focused companies, who may not be able to access the existing Government support schemes, to survive the Coronavirus/COVID-19 crisis. Together with the Future Fund, these proposals aim to prevent an innovation gap from opening up within the UK economy as a result of the pandemic.
Why is the additional funding required?
The Government’s two existing support schemes for SMEs are the Small Business Grant Fund and the Business Interruption Loan Scheme operated by lenders (principally the major UK banks).
The Small Business Grant Fund provides relief on business rates charged on non-domestic properties. Start-ups or small companies in the R&D space, for example, will however often sublet property or operate from co-working spaces and are therefore less likely to be eligible for the scheme than other SME’s.
To qualify for the Business Interruption Loan Scheme applicants must put forward a borrowing proposal to lenders that would be viable, were it not for the coronavirus pandemic and demonstrate that the loan is affordable and that repayments would be made. This can prove difficult for start-ups or R&D focused companies, many of which are loss making initially due to the nature of their activities.
If R&D focused companies fail to obtain funding and survive the Coronavirus pandemic, it will cause an innovation gap in industries including technology and life sciences. Widespread concern and intense lobbying from the sector have exerted pressure on Government to come up with a more tailored plan, leading to the announcement of the Future Fund and additional funding through Innovate UK.
What is Innovate UK?
Innovate UK is part of UK Research and Innovation, a publicly funded body. Innovate UK accelerates innovation by providing funding for businesses and research collaborators, contributing to a target of increasing UK R&D spending to 2.4% of GDP by 2027.
To date Innovate UK has invested around £2.5 billion in over 8,000 UK organisations, with industry match funding increasing that figure to £4.3 billion.
The announcement of the Innovate UK support came alongside the news that the Government will make up to £250 million available to innovative companies through the Future Fund support scheme.
Which companies can benefit?
The Government has said that £750 million will be provided as grants and loans. £200 million of this comes in the form of accelerated grant and loan payments for 2,500 businesses that are already working with Innovate UK customers, on an opt-in basis. The remaining £550 million will be made available as increased support for this group of organisations.
In addition to the amounts made available to existing customers, grants of up to £175,000 will be offered to around 1,200 firms not already in receipt of funding from Innovate UK.
Ordinarily, an application for Innovate UK grant funding would need to be made through an advertised funding competition, each of which has its own technical scope and eligibility criteria. The Government has said that the newly announced Innovate UK grants will be provided to R&D intensive small and medium sized companies, but at this stage no further eligibility criteria have been provided.
When will the funding become available?
The first payments will be made in mid-May, although it is not yet been clear whether these initial payments will only be to existing Innovate UK customers, and when the application process will open for those companies not already in receipt of Innovate UK funding.
Can the grants be used alongside the Future Fund?
The Future Fund (discussed here) is designed to support innovative UK based companies by providing convertible loans that will convert into equity in future funding rounds. To be eligible, applicants must have raised at least £250,000 in equity investment in the last 5 years.
We do not yet know whether accessing one support scheme would preclude applying for the other. However, the Innovate UK scheme could help innovative small and medium sized firms in need of an immediate cash injection to survive until they reach their first funding round.
We will track further announcements as they appear to understand the details of the scheme, and how to access it.