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£1.25B UK Government initiatives bridge the C-19 funding gap

Further to our article of earlier this month, which raised fears for the funding situation in the UK tech start-up sector, we are pleased to see the UK Government has announced plans to support the sector. The headline number is £1.25B, still some way short of support in Germany and France (€2B and €4B respectively), but it could still prove to be an important shot in the arm for the UK start-up scene.

On announcing the investment, Rishi Sunak, the UK Chancellor, explained:

“Britain is a global leader when it comes to innovation. Our startups 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.”

The funding is due to take 2 forms Convertible Loans (through the Future Fund) and R&D Support through Innovate UK:

  • The Future Fund: A total of £250m in the form of convertible loans through the British Business Bank, with an individual value between £125,000 and £5m. These loans will be at least matched by private investors to round the figure up to £500m+. They will only be allowed for UK registered companies and will only be offered where businesses have secured an equal or greater amount from private investors. This approach of co-investment should ensure that there is a natural filter to ensure that the right companies are receiving funding.

  • Innovate UK: £750m is being offered through a combination of Loans and Grants for research heavy small and mid-sized companies.

Whilst there are those in the tech industry who do not support this form of government intervention, notably Robin Klein (who outlines his reasons here), there broadly appears to be support for some medium term financial support for the start-up sector. Whilst the former figure of £250m does not seem like a substantial government investment (albeit this amount is open to review), we believe that the intention to start to strategically invest from May could provide a timely and vital filip to many cash-starved UK start-up companies. We also believe that this this investment now, will enable the right businesses to survive and lead to greater longer-term benefits as we look to emerge from the current crisis.

Dom Hallas, Executive Director of The Coalition for a Digital Economy (Coadec) said:

"Britain is the start-up capital of Europe and this package is a signal of intent that the Government will make sure it remains so in the future. This support will help early-stage innovators survive the crisis and thrive after it."

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