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U.K. Chancellor Rishi Sunak announced on Monday a £1.25. billion ($1.6 billion) support package for fast-growing firms or those focused on research and development (R & D) as they struggle through the coronavirus crisis.
The Government will provide fast-growing companies up to £250 million of loans between £125,000 and £5 million. These loans need to be matched by private investors, as part of a ‘Future Fund’ partnership with the state-owned British Business Bank, which offers credit to small and medium-size businesses. The loans will convert to equity if not repaid, and target unlisted U.K. companies with significant (more than £250 million of) private funding.
A further £750 million will be available for companies the government deems “the most R & D intensive.” This will be through Innovate U.K., the U.K.’s public innovation agency. Its 2,500 existing customers will be offered advances on grant and loan payments as well as an extra £550 million of support. A further £175,000 of support will be offered to 1,200 firms not currently receiving funding.
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Ministers said the support is crucial to protect the U.K.’s position as a “global leader” in innovation and allow companies to continue growing when the lockdown ends. Many of the companies set to benefit would have been ineligible for existing government support schemes, as fast-growing startups and R & D intensive firms are often loss-making.
Ritam Gandhi, founder and director of software startup Studio Graphene, said: “The nation’s early stage businesses have been in limbo for too long, with many deliberately loss-making startups falling between the cracks of state-backed loan schemes.”
Gandhi welcomed the measures but urged the government to do more to support innovative U.K. businesses through what is “probably the biggest challenge they have ever faced.”
Sunak said: “This new, world-leading fund will mean they [fast-growing startups and innovative SMEs] 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 funds will be available until September with payments beginning in mid-May adding to existing support for high-growth firms, including the British Patient Capital fund, the coming Life Sciences Investment Program, and R & D tax reliefs.
The Institute of Directors, an organization of company directors and business leaders, welcomed the support. Chief economist Tej Parikh said: “At such difficult times, the importance of innovation comes to the fore. When we emerge from this challenging time, we will need the U.K.’s entrepreneurial spirit to be stronger than ever.”
