COVID-19:  UK GOVERNMENT ANNOUNCES FUNDING FOR INNOVATIVE BUSINESSES

The U.K. Government has announced a £1.25 billion funding package for high-growth businesses driving innovation and development in the U.K. The package will be launched in May, with some payments expected to be made by mid-May. It is the latest in a series of measures by the U.K. Government to protect businesses in the wake of COVID-19.^[1] In March, the Government announced the Coronavirus Business Interruption Loan Scheme, entitling small and medium-sized businesses to access loans of up to £5 million. Separate funding schemes have been made available for large businesses, in the form of the Coronavirus Large Business Interruption Loan Scheme and the COVID-19 Corporate Financing Facility. The table in Annex I provides an overview of some of the funding schemes announced by the Government to date.

UK Innovative Business Fund

The £1.25 billion innovative business fund will be comprised of two packages:

• £500 million Future Fund: a £500 million scheme (made up of £250 million in Government funding and £250 million in matched private investment) for U.K.-based high-growth companies that have been affected by COVID-19; and
• £750 million Innovate UK fund: a £750 million scheme for small- and medium-sized businesses with the greatest focus on research and development, to be made available through Innovate UK

£500 million Future Fund

The Future Fund will be delivered in partnership with the British Business Bank and private investors. To qualify, firms must be unlisted U.K.-registered companies and have raised at least £250,000 in equity investment from third party investors in the past five years.

The Government will provide between £125,000 and £5 million in loans to eligible firms. The Government’s commitments must be matched by private investors. The loans will convert into equity if they are not repaid, or upon the company’s next funding round. The scheme will initially be open until September, with the Government’s initial £250 million of committed funding subject to ongoing review.

£750 million Innovate UK fund

The £750 million fund will be provided through Innovate UK, the U.K.’s innovation agency. Innovate UK is a public body that operates independently of the Government to invest in firms driving science and technology innovations likely to boost the U.K. economy. Under the scheme, up to £200 million will be made available to accelerate grant and loan payments to Innovate UK’s 2,500 existing customers, on an opt-in basis. A further £550 million will be available for existing customers by way of additional support. £175,000 of financial support will be offered to 1,200 firms who do not currently receive Innovate UK funding.

The announcement of the £1.25 billion package has been well-received by industry, including representatives of the FinTech sector, who believe that financial innovation will be key in helping the U.K. economy recover when it emerges from the COVID-19 pandemic.