April 23, 2020

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.







Innovative business fund (Part 1): £500m Future Fund

Lender: U.K. Government and private investors

U.K. Government will provide loans of between £125,000–£5m (matched by private investors) to U.K.-based high-growth companies

Borrowers: U.K. registered unlisted companies that have raised at least £250,000 in equity investment in the past five years[3]


Innovative business fund (Part 2): £750m Innovate UK fund

Lender/Funder: Innovate UK

Innovate UK will make up to £750m available in grants and loans to UK Innovate customers and up to 1,200 non-customer innovative firms

Borrowers: existing customers of Innovate UK and up to 1,200 non-customer innovative firms[3]


Coronavirus Business Interruption Loan Scheme

Lender: Accredited lenders of British Business Bank


Guarantor: U.K. Government

Accredited lenders will provide up to £5m in term loans, overdrafts, invoice or asset finance to SMEs

Borrowers: U.K.-based SMEs with an annual turnover of up to £45m

Insufficient security not a condition to access scheme


Lenders cannot demand personal guarantees for facilities under £250,000


Personal guarantees may still be required for loans above £250,000

Coronavirus Large Business Interruption Loan Scheme

Lender: Accredited lenders of British Business Bank


Guarantor: U.K. Government

Accredited lenders will provide between £25m–£50m in term loans, overdrafts, invoice or asset finance to larger businesses with annual turnover of between £45m–£500m

Borrowers: Businesses with annual turnover of between £45m–£500m

No personal guarantees are permitted for facilities under £250,000


Personal guarantees may be given for facilities of £250,000 and over but claims cannot exceed 20% of losses after all other recoveries have been applied

COVID-19 Corporate Financing Facility

Purchaser: Bank of England


Guarantor: Required if issuer is not group’s primary entity and is not investment-grade

BOE will purchase commercial paper from eligible companies to provide bridging support to companies experiencing funding difficulties

Issuer: Companies (typically investment grade) that make a material contribution to the U.K. economy


Not available to banks, building societies, leveraged investment vehicles/groups predominantly active in business subject to financial regulation

Asset: Commercial paper issued by eligible companies




[1]  Further details of the U.K. and EU’s responses to COVID-19 can be found in our client notes: Planning in a Pandemic - Considerations for Financial Institutions in the US, EU and UK, Short Sale Bans in Response to the Covid-19 Pandemic; COVID-19: Bank of England Announces Policy Measures for Financial Market Participants; COVID-19: FCA Announcement on Key Workers in Financial Services and Other Issues; and on the COVID-19 section of our Financial Regulatory blog.
[2]  Details of other U.K. Government schemes that have been established to help U.K. businesses are available in their Financial support for businesses during coronavirus (COVID-19).
[3]  Further eligibility requirements may be announced in due course.


Barnabas Reynolds



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+44 20 7655 5528


Thomas Donegan



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Chloe Barrowman



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