The UK’s start-ups and research and development (R&D) firms are to benefit from a £1.25 billion financial support package in a bid to protect emerging businesses from the effects of the ongoing coronavirus pandemic.
Announced yesterday by chancellor Rishi Sunak, the so-called “targeted and tailored” support for innovative businesses will be made up of the Future Fund, a £500 million loan scheme for start-ups, and a £750 million fund for SMEs across all industries that focus on R&D.
Acknowledging that the UK is a “global leader when it comes to innovation”, Sunak suggested it would likely be these companies that help the UK out of crisis post-pandemic. Protecting them, he said, would ensure their ability to eventually “power our growth out of the coronavirus crisis”.
£500 million for start-ups
At the core of this newly promised package is the Future Fund. Aimed at the country’s “high-growth” firms, the £500 million scheme will provide UK companies with loans worth between £125,000 and £5 million, with private investors “at least matching” what the government pays out.
The loans will be delivered in partnership with the British Business Bank, the same organisation that is heading up the Coronavirus Business Interruption Loan Scheme (CBILS).
When firms reach their next funding round, or reach the end of the loan without repaying the sum, the loans will automatically convert into equity in the company. Effectively acting as an investor, this will in theory give the taxpayer a stake in operations.
Those looking to apply for the scheme will need to check if they are eligible. The requirements stated by the government include:
- The business must be an unlisted UK registered company;
- It must previously have raised at least £250,000 in equity investment from third party investors in the last five years;
- And it must have a “substantive” economic presence in the UK.
- Further information can be found in the government’s “Headline Terms” document.
In the first instance the government is committing to £250 million in funding, with the scheme initially being open until September. Whether the fund requires expanding will be “kept under review”, it says.
£750 million for R&D
Elsewhere in the support package, £750 million worth of “targeted support” is being made available for SMEs focused on R&D. This money will be made available through the grants and loan scheme system operated by Innovate UK, the country’s national innovation agency.
For those already in receipt of Innovate UK loans, the organisation says it will be accelerating up to £200 million of grant and loan payments on an “opt-in basis”. A further £550 million will also go toward supporting these firms, of which there are around 2,500.
For those who currently aren’t in receipt of Innovate UK funding, £175,000 will be offered.
A welcome announcement
The announcement of further financial support comes after several weeks of promises from the chancellor, who since his first Budget statement back in March has promised billions to various sectors of the British economy.
The money offered across the different support packages is without precedent, but the Treasury has attracted considerable criticism too.
Chiefly, these criticisms have pointed out that the systems in place are too slow (self-employed workers are expected to wait until June for their first support payment from the government, for example), and that they leave a considerable number of people without support.
This latest announcement, however, has been welcomed by many in the creative industry. Reacting to the news, Creative Industries Federation CEO Caroline Norbury said: “It is welcome to see government recognising the importance of creativity and innovation during this challenging time.”
For more information on what support is on offer from the government, and to read how designers are responding to the challenges posed by the crisis, head to our Coronavirus and Design news feed.